Goldman-Backed Rothesay Life Buys Bulk Aegon's U.K. Annuities

Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., agreed to sell two-thirds of its U.K. annuity portfolio to Rothesay Life Ltd., helping to boost capital buffers under new regulations.

Aegon will initially reinsure 6 billion pounds ($8.5 billion) of liabilities of its Scottish Equitable Plc unit with Rothesay before transferring them, the Hague-based company said Monday. Rothesay’s investors, including Goldman Sachs Group Inc., Blackstone Group LP, and Singapore’s GIC Pte are providing “capital support,” a separate statement showed.

“We are positive on the terms of this deal,” Cor Kluis, an analyst at Rabobank Groep, wrote in a note to clients. “The cash position of the group will improve by about 250 million pounds by this transaction.”

Aegon rallied as much as 3.1 percent and was trading at 4.8 euros at 10:31 a.m. in Amsterdam, trimming the loss this year to 8 percent.

The Dutch company said in January that it was exploring options for its annuity book, which has 250,000 customers and 9 billion pounds of reserves, because the credit and longevity risk made the business capital intensive. The insurer is also in the process of buying back 400 million euros of shares and cutting costs to improve its return on equity.

Capital Requirement

With the sale, Aegon’s ratio of eligible funds to the solvency capital requirement will rise to about 165 percent. The insurer is using a partial internal model to calculate risk under new stricter Solvency II capital regulations that were introduced across the European Union Jan. 1. The reinsurance transaction is expected to result in a loss for Aegon of about 30 million pounds.

“This is an important step in the process to fully divest our U.K. annuity portfolio, and will enable us to focus on our fast-growing platform in the U.K.,” Aegon Chief Executive Officer Alex Wynaendts said in the statement.

The transaction covers about 187,000 policyholders who will remain customers of Aegon until the transfer of the liabilities to Rothesay takes place.

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