AEGON N.V. has agreed to pay $1.3 billion in cash for Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York.

AEGON, The Hague, Netherlands, and Merrill Lynch & Company Inc., New York, hope to complete the deal by Dec. 31, AEGON says.

Merrill Lynch has been using the companies it is selling to issue variable annuities.

“Merrill Lynch expects to record a significant gain on the sale during the fourth quarter of 2007,” AEGON says.

Merrill Lynch will continue to sell annuities through its financial advisor network, and the companies AEGON is acquiring will continue to issue the annuities, AEGON says.

AEGON’s Transamerica subsidiaries will help Merrill Lynch advisors sell variable annuities, AEGON says.

Merrill Lynch Life and ML Life generated about $800 million of variable annuity sales in 2006, and they held about $10 billion in variable annuity assets at the end of 2006.