Aegon (AEX: AGN/NYSE: AEG) and Merrill Lynch (NYSE: MER) today announced they will form a strategic business relationship in the areas of insurance and investment products.
As part of this relationship, an Aegon company has signed an agreement to acquire Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York for USD 1.3 billion in cash. The purchase price includes excess surplus of approximately USD 425 million. The transaction is expected to close before the end of the fourth quarter of 2007, subject to customary regulatory approvals and closing conditions.
Merrill Lynch will continue to serve the insurance needs of its clients through its core distribution and advisory capabilities. Importantly, Merrill Lynch will continue to offer its flagship Merrill Lynch Investor Choice Annuity product through its financial advisor network. Products will be issued by the companies Aegon is acquiring. Both companies anticipate substantial benefits for clients arising from this partnership including increased breadth of product offerings and enhancements to existing products.
Strong distribution partners
Aegon's Transamerica companies will provide support to the Merrill Lynch financial advisor network. This acquisition is in line with Transamerica's strategy to develop alliances with strong distribution partners. This new relationship will place Transamerica in a position of strength in the sales of variable annuities within the wirehouse distribution channel.
With approximately USD 800 million of variable annuity sales in 2006, and approximately USD 10 billion of variable annuity assets at year-end 2006, the acquisition of the two life insurance companies will place Aegon firmly in the top ten of variable annuities sellers in the wirehouse and broker/dealer segment globally.
"By working with a world-class company like Transamerica, we will be able to focus on insurance product distribution and address the insurance, investment and retirement needs of our clients more broadly," said Robert J. McCann, president of Merrill Lynch's Global Private Client Group. "Not only will our clients benefit from Transamerica's scale and risk management expertise, but this strategic relationship will also allow us to jointly develop innovative insurance and investment products as well as pursue new business and distribution opportunities."
Sales growth
"This acquisition provides the framework for a strong strategic relationship with Merrill Lynch, creating a significant opportunity to grow the sales of the Merrill Lynch Investor Choice Variable Annuity while jointly building and branding new and innovative products for our clients," said Pat Baird, president and CEO of Aegon USA, Inc.
Aegon expects the acquisition to have a marginally positive effect on earnings per share. Aegon will finance the transaction using existing excess capital. As a result, this acquisition will not impact Aegon's ability to execute its recently announced EUR 1 billion share repurchase program. Merrill Lynch expects to record a significant gain on sale during the fourth quarter of 2007 and anticipates the transaction to be slightly accretive to earnings per share and to have a positive effect on return on equity in 2008 after redeployment of proceeds.
ABOUT MERRILL LYNCH
Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 38 countries and territories and total client assets of approximately USD 1.7 trillion. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch owns approximately half of BlackRock, one of the world’s largest publicly traded investment management companies with more than USD 1 trillion in assets under management. For more information on Merrill Lynch, please visit www.ml.com.
