AEGON N.V. says it plans to sell Transamerica Reinsurance to SCOR S.E. for a total of about $1.4 billion.
Transamerica Re, Charlotte, N.C., generated $102 million in net income in 2010 on $2.2 billion in gross written premiums, and SCOR, Paris, says acquiring it should make it the second biggest life reinsurer in the United States.
The price for Transamerica Re, Charlotte, N.C., would include $912 million in cash and the release of $497 million in capital, according to SCOR.
AEGON, the Hague, Netherlands, hopes to use $1.1 billion in proceeds from the deal to buy core capital securities back from the Dutch State. The Dutch State ended up with the securities when it helped AEGON during the recent financial crisis.
AEGON would keep blocks of life reinsurance business with a book value of about $400 million after the transaction was completed. Most of the retained business would consist of variable annuity guarantee business, the company says.
The reinsurance business being retained “is substantially hedged for financial market risks and produces normalized results which are negligible,” AEGON says.
The transaction should help AEGON reduce reinsurance reserve financing related to Transamerica Re by about 50%, AEGON says. AEGON would start out maintaining about half of the collateral needed to provide reinsurance financing, then shift the responsibility for the reserves to SCOR over a 15-year period.
To implement the deal, SCOR would:
- Create a collection of retrocession agreements between its companies and AEGON statutory entities.
- Acquire Transamerica International Reinsurance Ireland.
- Take over the operational assets and systems of AEGON’s U.S. reinsurance business.
- Have AEGON’s U.S. companies recapture business reinsured by the AEGON reinsurance company in Ireland.
AEGON and SCOR hope to get the regulatory approvals they need to close on the deal by the end of the summer.
SCOR says it can pay for the deal by using its own cash and possibly by issuing some debt. SCOR says it has no plans to issue new shares of stock to help pay for the deal.
The deal will help strengthen SCOR in Asia and Latin America as well as in the United States, SCOR says.
SCOR notes that it wants to focus on assuming “biometric risk” and has no interest in assuming other types of risk, such as annuity risk.
Paul Rutledge, an actuary and the current head of the Transamerica Re management team, will stay on when SCOR takes over, and SCOR will move the base of its global life operations to Charlotte, SCOR says.
Alex Wynaendts, the chief executive officer of AEGON, says AEGON made the Transamerica Re deal to raise money to re-pay the Dutch State and focus management attentions on core operations.
“We are grateful for the continued dedication of the management and employees of Transamerica Reinsurance since announcing our intentions and are pleased to have identified a good home for this highly regarded business,” Wynaendts says.