Aegon announced today that it has successfully completed an innovative securitization transaction to improve capital efficiency and optimize the capital structure as part of the Group’s new strategy.
This transaction adds around EUR 315 million (GBP 250 million) of core capital, thus enhancing the financial flexibility of the Group. Also, the transaction improves the return on capital (RoC1) deployed in the United Kingdom.
In June 2008, Aegon announced three strategic priorities to support its growth ambitions: to reallocate capital toward businesses with higher growth and return prospects, to improve growth and returns from existing businesses, and to manage Aegon as an international Group. This transaction supports each of these priorities.
Aegon’s CEO and Chairman of the Executive Board, Alexander Wynaendts says: “Innovative transactions such as this enable us to manage capital more effectively across the Aegon Group, representing one of our key strategic objectives. The fact that we’ve completed this transaction in the current financial environment reflects confidence in Aegon's continued financial strength.”
The private transaction, structured by Barclays Capital and rated by Fitch as single A , is a value in-force (VIF) securitization which enables Aegon to monetize the value of a portion of future profits from a book of unit-linked business within its UK operations. In addition, each year for the first three years, Aegon has the option to contribute new business to maintain the level of financing outstanding.
In January 2007, Aegon completed a securitization, which enabled the company to release capital of GBP 90 million from its UK business, which won acclaim for its innovative approach and won the award for “Deal of the Year” from the magazine Life & Pensions.
Aegon will continue to explore further opportunities, such as securitizations, to improve its capital efficiency, optimize its capital allocation and improve returns.
1) Net underlying earnings / average capital excluding revaluation reserves