Aegon today announces that it has reinsured an additional part of its longevity exposure in the Netherlands with Reinsurance Group of America, Incorporated (RGA). This transaction improves the risk profile of the Dutch Life business and releases capital at attractive terms. As a result of actions taken over the past year, Aegon expects to increase the regular remittances from this business.
The reinsurance agreement provides protection against the longevity risk associated with EUR 7 billion of pension liabilities. The risk transfer is effective per December 31, 2021 and will continue until the reinsured block of business has run off in full. The transaction includes deferred pensioners as well as in-payment policies of pensioners and dependents, leading to a very long run-off period. This reinsurance protects Aegon against the potential adverse financial impact of longevity risk over the full life of the policies at an attractive cost of capital. The transaction follows a similar longevity reinsurance structure executed by Aegon in December 2019. Together, these agreements mitigate approximately 40% of the longevity risk exposure of the Dutch life business. These reinsurance agreements have no impact on the services and guarantees that Aegon provides to its policyholders.
"This longevity reinsurance agreement is another bilateral action taken to maximize the value of our Dutch Life business," says Lard Friese, CEO of Aegon N.V. "In line with our strategy, this builds on actions we have previously taken to improve the risk profile of this business and is another step to generate stable, regular, and reliable cash flows from the Dutch Life business."
The benefit to the Dutch Life business Solvency II ratio is expected to be around 15%‑points. This corresponds to an approximate 5%-point increase in the Group's Solvency II ratio. Operating capital generation of the Dutch Life business will initially be reduced by EUR 40 million per year and the IFRS operating result will decrease by less than EUR 15 million per year. The impact on operating capital generation and the operating result will decrease over time in line with the maturity of the reinsured portfolio.
Aegon expects to increase the regular quarterly remittances of the Dutch Life business from EUR 25 million to EUR 50 million per quarter as of the first quarter of 2022. This follows management actions taken over the past year to strengthen the capital position, improve the risk profile, and increase capital generation.