Aegon has agreed to sell its two largest US run-off businesses, the payout annuity business and the Bank Owned / Corporate Owned Life Insurance business (BOLI/COLI), to Wilton Re.
The transaction is consistent with the company's stated strategic objective to reduce the amount of capital allocated to its run-off businesses.
Under the terms of the agreement, Aegon's Transamerica life subsidiaries will reinsure USD 14 billion of liabilities to affiliates of Wilton Re US Holding Inc. The transaction and related management actions are expected to result in a capital release of approximately USD 700 million (EUR 630 million) in 2017.
"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."
Group Solvency II ratio improves by 6%-points
As a result of the actions announced today, Aegon's Group Solvency II ratio is estimated to improve by approximately 6% 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 USD 30 million (EUR 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 USD 300 million (EUR 270 million), to be reported in Other Charges at the time of closing. The transaction is subject to normal regulatory approvals and is expected to close in the summer of 2017
About Wilton Re
Wilton Re is a leading provider of In Force Solutions. Focusing on the North American life insurance market, the Company provides risk capital and related services including M&A. Their administrative capabilities provide the industry with efficient and effective runoff management of legacy blocks of life insurance and annuity contracts.
The Company also partners with companies to implement new business strategies for middle-market sales, with an emphasis on worksite, senior market and simplified term products. Wilton Re offers fully customized solutions that include private labeling with supporting delivery and administrative systems.
Wilton Re is committed to creating solutions that enhance value for its clients, their policyholders and shareholders. Their approach is centered on building lasting relationships with our business partners and sharing resources, industry knowledge and experience in an open, transparent manner.