AEGON Focuses on Core Business, Sells Sizable UK Annuity
AEGON N.V. AEG divested a major portion of its UK annuity portfolio to Rothesay Life. The divestiture is in sync with the company’s strategy to free up capital from its non-core business. Also, pursuant to the agreement, AEGON will reinsure GBP 6 billion of liabilities to Rothesay Life, followed by a Part VII transfer. It is estimated that the Solvency II ratio for AEGON's operations in the United Kingdom will increase to about 155% after the reinsurance transaction and to around 165% after the Part VII transfer.
Identifying the annuity business as non-core, AEGON intends to divest the same. This transaction is a step toward its goal. The company is also weighing options to sell the remaining one-third annuity business and intensify its focus on the core business. With Rothesay Life being a specialist provider in the UK annuity market, the company believes its annuity customers are in safe hands.
With this divestiture, the company’s free cash flow is expected to be lowered by about GBP 35 million. The transaction is also estimated to weigh on 2016 underlying earnings before tax by about GBP (20) million. Also, the company expects to incur loss of GBP 30 million and in other charges in the second quarter of 2016. However following the closure of the divestiture, the company intends to use the excess capital for growth initiatives.
AEGON has been serving the U.K. annuity market for over five years. Henceforth, the company intends to focus on providing financial advice in person or online to help customers build their savings while they are working and then manage the same post retirement.
AEGON currently carries a Zacks Rank #3. Some better-ranked multi-line insurers are AXA Group AXAHY, Swiss Re Ltd SSREY and SCOR SE SCRYY. While AXA Group and Swiss Re sport a Zacks Rank #1 (Strong Buy), SCOR SE has a Zacks Rank #2 (Buy).
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