Aegon N.V. has become the latest financial services giant to change its strategy in the United States.
Based in The Hague, in the Netherlands, Aegon has the equivalent of about $442 billion in assets.
The company is best known in the United States as the parent of Transamerica, a company that has been a major player in the U.S. life insurance annuity, long-term care insurance (LTCI) and worksite benefits markets.
- A link to the Aegon Capital Markets Day presentation is available here.
- An article about Prudential PLC’s realignment strategy is available here.
Aegon acquired Transamerica in 1999, when it was based in San Francisco, and when a typical high-grade U.S. corporate bond yielded about 7.5%.
Today, a typical high-quality U.S. corporate bond is yielding only about 3%, and is only about 2 percentage points more than 10-year Treasury bonds.
The low bond yields and the low “spread” between corporate bond rates and Treasury bond rates, mean that life insurers have a hard time using high-quality investments to generate the kinds of investment yields that traditionally have helped support many types policies.
These include LTCI policies, disability insurance policies, life insurance guarantees, annuity guarantees, and other types of products with benefits that typically go out far in the future, or that are designed to pay streams of benefits that are designed to last for several years.
Companies like MetLife Inc., AXA S.A., Prudential PLC and American International Group Inc. have started or completed major transformations in recent years, in part because of concerns about low interest rates.
Aegon gave signs that change was coming when in June Lard Friese, Aegon’s new CEO, hired Duncan Russell to be its chief transformation officer.
The company sent out another signal when, on Oct. 29, it announced that it had completed the sale of its iconic Pyramid building complex in San Francisco for $650 million.
Aegon executives then spelled out what kinds of changes are ahead for the U.S. operations last week, during a Capital Markets Day web meeting.