Aegon has completed a second innovative capital markets transaction to reduce its risk from future improvements in longevity in the Netherlands.
The transaction is the latest step in Aegon’s strategy to open new capital markets outlets to lay off longevity risk and further strengthens its leadership in the Dutch pension market. The impact on Aegon’s earnings is limited as this transaction was done at an attractive cost of capital.
The transaction has a maturity of 20 years with a commutation covering exposures that run longer than 20 years. It covers underlying longevity reserves in the Netherlands of EUR 1.4 billion. The transaction is the second undertaken by Aegon to reduce longevity risk in Aegon’s pension business in the Netherlands, following a longevity hedge on EUR 12 billion of reserves completed in January 2012. Aegon will continue to explore further opportunities to manage its Dutch longevity risk efficiently.
Aegon’s partners in the execution of this transaction are Société Générale in the role of intermediary and Risk Management Solutions as modelling agent. The risk is assumed by third-party investors and reinsurers including SCOR.