Aegon has agreed to divest a block of life reinsurance business to SCOR and to dissolve a related captive insurance company.
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The transaction is consistent with Aegon's stated strategic objective to reduce the amount of capital allocated to its run-off businesses.
Under the terms of the agreement, Aegon's Transamerica life subsidiaries will reinsure approximately USD 750 million of liabilities to SCOR. The transaction covers approximately half of the life reinsurance business that Transamerica retained after it divested the vast majority of its life reinsurance business to SCOR in 2011. It is expected that the transaction has a one-time benefit of approximately USD 75 million on Transamerica's capital position and a slightly positive effect on recurring capital generation.
Future underlying earnings are not affected by this transaction as earnings of this block of reinsurance business are part of run-off businesses, which are not included in underlying earnings before tax. The transaction is expected to result in a pre-tax IFRS loss of approximately USD 125 million (EUR 105 million) and will be reported in Other charges in the fourth quarter 2017 results.
As part of the transaction, the company will dissolve a related captive insurance company in place to finance redundant reserves, generally referred to as XXX term life insurance reserves, and will redeem USD 475 million of operational leverage supporting that captive.