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Aegon to divest majority of U.S. run-off businesses

Staff Writer |
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.

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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 $14 billion of liabilities to affiliates of Wilton Re (external link) US Holding Inc. The transaction and related management actions are expected to result in a capital release of approximately $700 million (EUR 630 million) in 2017.

As a result of the actions, 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 U.S. operations to be reduced by approximately $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 $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.

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