Aegon (AEX: AGN/NYSE: AEG) and Merrill Lynch (NYSE: MER) announced today they have finalized their agreement to form a strategic business relationship in the areas of insurance and investment products.
Aegon USA, Inc. also completed the acquisition of Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York for USD 1.25 billion in cash. The purchase price includes excess surplus of approximately USD 425 million.
Under the alliance, Aegon's Transamerica companies will continue to supply insurance and investment products, including offering the flagship Merrill Lynch Investor Choice Annuity product through the acquired Merrill Lynch subsidiaries. Through its financial advisor network, Merrill Lynch will continue to serve the insurance needs of its clients through its core distribution and advisory capabilities.
Both companies anticipate substantial benefits for clients arising from the partnership including increased breadth of product offerings and enhancements to existing products. The acquisition of the two life insurance companies, with combined variable annuity sales of USD 768 million through the first nine months of 2007, moves Aegon to a top five position in the wirehouse channel.
"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.
"Insurance is a prominent part of our wealth management business at Merrill Lynch. This transaction will allow us to focus on product distribution while working with our partners at Transamerica on developing new products for our clients," said Robert J. McCann, President of Merrill Lynch's Global Wealth Management business. "It is also part of the firm's broader strategy to strengthen its capital position from investments and the sale of non-core assets. This transaction will allow Merrill Lynch to redeploy approximately USD 800 million in equity capital to other parts of our business."
Aegon expects the acquisition to add scale to its existing business and to have a marginally positive effect on earnings per share. Aegon financed the transaction using existing excess capital. Merrill Lynch expects to record a 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 2.0 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 USD1 trillion in assets under management. For more information on Merrill Lynch, please visit www.ml.com