AEGON announces the divestment of its life reinsurance business, Transamerica Reinsurance, to SCOR. The divestment will result in a total after-tax consideration of $ 1.4bn, consisting of cash proceeds of $ 0.9bn with a further $ 0.5bn in capital released. AEGON expects to upstream $ 1.1bn to the holding company to support the repurchase of the remaining core capital securities issued to the Dutch State. AEGON has committed to repurchasing these securities by the end of June 2011.
Under the agreement, AEGON will divest its global life reinsurance activities with the exception of select blocks of business that are to be retained by AEGON. The retained businesses with a book value of $ 0.4bn comprise mainly variable annuity guarantee business. The transaction, which consists of a number of reinsurance agreements, is subject to final approval of the relevant regulatory authorities and is expected to close in the summer of this year.
With this transaction AEGON sharpens its focus on its core business of life insurance, pensions and asset management, while improving its risk-return profile, and reducing reinsurance reserve financing related to the divested life reinsurance business by approximately 50%.
Our View:
The announced sale solves the question on how (5,37 EUR, 2,99%) is to repay the remaining € 1500m of state aid + penalty of € 750m.
Conclusion:
We remain Accumulating with an unchanged target at € 7.0.