Aegon Divests Remaining Part of UK Annuity Portfolio
Aegon announces the sale of GBP 3 billion annuity liabilities to Legal & General. This
transaction follows the recently announced sale of GBP 6 billion of its UK annuity
portfolio and completes the divestment of Aegon's own annuity portfolio. Aegon now has
approximately GBP 1 billion annuity liabilities remaining through an inward reinsurance
transaction. Today's divestment is consistent with the company's strategy to free up
capital from non-core businesses. The expected Solvency II capital release following the
completion of the transaction announced today is approximately GBP 275 million.
"I am very pleased that we are able to announce this transaction," said Alex Wynaendts,
CEO of Aegon. "Achieving the divestment of our UK annuity portfolio is an important step
in the strategic repositioning of our business in the United Kingdom. The divestment
enables us to fully focus on growing our platform business. At the same time, I am pleased
that we have found in Legal & General a good home for our annuity customers."
In 2010, Aegon chose to no longer be an active player in the UK annuity market, as it
believed these products did not meet Aegon's long-term risk adjusted return requirements.
The divestment of the annuity portfolio significantly reduces Aegon's exposure to both
longevity and credit risk. The transaction is in line with the company's continued shift
to capital-light businesses.
The divestment of the annuity portfolio enables Aegon to focus on its platform, which
helps workplace savers and consumers to build their savings across their working lives,
and then manage an income in retirement with the support of a financial adviser or
directly online. The UK platform-based pension market is growing fast, and by
repositioning our business, Aegon is in a stronger position to benefit from this growth
opportunity.
Under the terms of the agreement, Aegon will initially reinsure GBP 3 billion of
liabilities to Legal & General followed by a Part VII transfer. The Solvency II ratio of
Aegon's operations in the United Kingdom is expected to increase by an estimated 15%-point
following the reinsurance transaction with Legal & General, and another ~5%-point
following the Part VII transfer.
Aegon expects annual capital generation from its UK operations to be reduced by
approximately GBP 30 million (EUR 38 million) as a result of the transaction announced
today. Underlying earnings before tax are expected to be reduced by approximately
GBP 16 million (EUR 20 million) per annum. The reinsurance transaction is expected to
result in an IFRS loss of approximately GBP 215 million (EUR 273 million), which will be
reported in other charges in the second quarter of 2016.
To ensure a smooth transition for its customers, Aegon and Legal & General will put a
migration plan in place in which the administration of the annuity portfolio will be
executed by Aegon until the completion of the Part VII transfer.
DISCLAIMERS
Forward-looking statements
The statements contained in this document that are not historical facts are
forward-looking statements as defined in the US Private Securities Litigation Reform Act
of 1995. The following are words that identify such forward-looking statements: aim,
believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on,
plan, continue, want, forecast, goal, should, would, is confident, will, and similar
expressions as they relate to Aegon. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are difficult to
predict. Aegon undertakes no obligation to publicly update or revise any forward-looking
statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which merely reflect company expectations at the time of writing. Actual
results may differ materially from expectations conveyed in forward-looking statements due
to changes caused by various risks and uncertainties. Such risks and uncertainties include
but are not limited to the following:
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- Changes in general economic conditions, particularly in the United States, the
Netherlands and the United Kingdom;
- Changes in the performance of financial markets, including emerging markets, such as
with regard to:
- The frequency and severity of defaults by issuers in Aegon's fixed income investment
portfolios;
- The effects of corporate bankruptcies and/or accounting restatements on the financial
markets and the resulting decline in the value of equity and debt securities Aegon
holds; and
- The effects of declining creditworthiness of certain private sector securities and the
resulting decline in the value of sovereign exposure that Aegon holds;
- Changes in the performance of Aegon's investment portfolio and decline in ratings of
Aegon's counterparties;
- Consequences of a potential (partial) break-up of the euro or the potential exit of
the United Kingdom and/or Greece from the European Union;
- The frequency and severity of insured loss events;
- Changes affecting longevity, mortality, morbidity, persistence and other factors that
may impact the profitability of Aegon's insurance products;
- Reinsurers to whom Aegon has ceded significant underwriting risks may fail to meet
their obligations;
- Changes affecting interest rate levels and continuing low or rapidly changing interest
rate levels;
- Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP
exchange rates;
- Changes in the availability of, and costs associated with, liquidity sources such as
bank and capital markets funding, as well as conditions in the credit markets in
general such as changes in borrower and counterparty creditworthiness;
- Increasing levels of competition in the United States, the Netherlands, the United
Kingdom and emerging markets;
- Changes in laws and regulations, particularly those affecting Aegon's operations'
ability to hire and retain key personnel, the products Aegon sells, and the
attractiveness of certain products to its consumers;
- Regulatory changes relating to the pensions, investment, and insurance industries in
the jurisdictions in which Aegon operates;
- Standard setting initiatives of supranational standard setting bodies such as the
Financial Stability Board and the International Association of Insurance Supervisors
or changes to such standards that may have an impact on regional (such as EU),
national or US federal or state level financial regulation or the application thereof
to Aegon, including the designation of Aegon by the Financial Stability Board as a
Global Systemically Important Insurer (G-SII).
- Changes in customer behavior and public opinion in general related to, among other
things, the type of products also Aegon sells, including legal, regulatory or
commercial necessity to meet changing customer expectations;
- Acts of God, acts of terrorism, acts of war and pandemics;
- Changes in the policies of central banks and/or governments;
- Lowering of one or more of Aegon's debt ratings issued by recognized rating
organizations and the adverse impact such action may have on Aegon's ability to raise
capital and on its liquidity and financial condition;
- Lowering of one or more of insurer financial strength ratings of Aegon's insurance
subsidiaries and the adverse impact such action may have on the premium writings,
policy retention, profitability and liquidity of its insurance subsidiaries;
- The effect of the European Union's Solvency II requirements and other regulations in
other jurisdictions affecting the capital Aegon is required to maintain;
- Litigation or regulatory action that could require Aegon to pay significant damages or
change the way Aegon does business;
- As Aegon's operations support complex transactions and are highly dependent on the
proper functioning of information technology, a computer system failure or security
breach may disrupt Aegon's business, damage its reputation and adversely affect its
results of operations, financial condition and cash flows;
- Customer responsiveness to both new products and distribution channels;
- Competitive, legal, regulatory, or tax changes that affect profitability, the
distribution cost of or demand for Aegon's products;
- Changes in accounting regulations and policies or a change by Aegon in applying such
regulations and policies, voluntarily or otherwise, which may affect Aegon's reported
results and shareholders' equity;
- The impact of acquisitions and divestitures, restructurings, product withdrawals and
other unusual items, including Aegon's ability to integrate acquisitions and to obtain
the anticipated results and synergies from acquisitions;
- Catastrophic events, either manmade or by nature, could result in material losses and
significantly interrupt Aegon's business; and
- Aegon's failure to achieve anticipated levels of earnings or operational efficiencies
as well as other cost saving and excess capital and leverage ratio management
initiatives.
</pre> Further details of potential risks and uncertainties affecting Aegon are described in
its filings with the Netherlands Authority for the Financial Markets and the US Securities
and Exchange Commission, including the Annual Report. These forward-looking statements
speak only as of the date of this document. Except as required by any applicable law or
regulation, Aegon expressly disclaims any obligation or undertaking to release publicly
any updates or revisions to any forward-looking statements contained herein to reflect any
change in Aegon's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Aegon's roots go back more than 170 years - to the first half of the nineteenth
century. Since then, Aegon has grown into an international company, with businesses in
more than 20 countries in the Americas, Europe and Asia. Today, Aegon is one of the
world's leading financial services organizations, providing life insurance, pensions and
asset management. Aegon's purpose is to help people achieve a lifetime of financial
security. More information: aegon.com [http://www.aegon.com ] .
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Media relations
Debora de Laaf
+31-(0)70-344-8730
[email protected]
Investor relations
Willem van den Berg
+31-(0)70-344-8405
[email protected]
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