Aegon, a Dutch company, says it made the Wilton Re deal partly to improve its solvency ratio under the European Solvency II standard. (Photo: Thinkstock)

A company owned by the Canada Pension Plan Investment Board has agreed to reinsure large blocks of Transamerica life insurance and annuity business

The reinsurer, part of Norwalk, Connecticut-based Wilton Re Ltd., could take responsibility for paying and administering a total of about $14 billion in Transamerica obligations through an administrative reinsurance agreement.

Aegon N.V., Transamerica’s Dutch parent, and Wilton Re announced the agreement today in separate press releases. 

(Related: Aegon Offloads $4.4 Billion of Annuities to Legal & General)  

The companies predicted the deal would cause Aegon to record a $300 million accounting loss but help it free about $700 million in capital for other purposes. The deal should also help Aegon improve its performance under Europe’s Solvency II solvency ratio rules, the companies said.

The companies hope to complete the deal this summer.

The Wilton Re-Transamerica deal agreement includes a big, closed block of bank-owned life insurance and corporate-owned life insurance. A bank uses BOLI to protect itself against the loss of its employees. Companies other than banks use COLI to protect themselves against the loss of their employees. Transamerica discontinued BOLI and COLI sales in 2010.

The Wilton Re-Transamerica agreement also includes a block of payout annuities, or single-premium immediate annuities, that have been used to fund structured settlements for parties involved in lawsuits.

The Canada Pension Plan Investment Board acquired Wilton Re in 2014. The board manages the equivalent of about $250 billion in pension assets, in U.S. dollars, for 19 million Canadian workers and retirees.

Transamerica, the Baltimore-based parent of a large family of U.S. life and investment companies, has been part of Aegon since 1999.

Transamerica is known for selling life insurance, annuities, worksite benefits and long-term care insurance. The Wilton Re-Transamerica deal just announced would involve only the closed blocks of BOLI, COLI and structured settlement annuity business. The deal would not have any direct effect on Transamerica’s current life, annuity or long-term care insurance sales.

Aegon put the Transamerica blocks of business involved in the new Wilton Re deal in runoff mode, or wind-down mode, years ago. Transamerica continued to collect premiums for the business and pay claims, but it did not sell new BOLI or COLI policies, or write new structured settlement payout annuities.

Alex Wynaendts, the chief executive officer of Aegon, said in a statement that the reinsurance deal will increase Aegon’s financial flexibility.

The deal should also be good for the customers affected, because Wilton Re is a highly respected reinsurer, Wynaendts said.

Wilton Re acquired Aegon’s Transamerica Life Canada unit through another reinsurance deal in 2015. Wilton Re now operates that unit under the name ivari.

Chris Stroup, Wilton Re’s chief executive officer, said Wilton Re will maintain current service levels for the affected Transamerica customers by keeping the team that now administers the customers’ products in place.  

— Read Aegon Added to FSB’s List of 9 Too-Big-to-Fail Insurers on ThinkAdvisor.