Insurer Aegon to sell Transamerica Reinsurance arm in US, restructure British operations

By Toby Sterling, AP
Tuesday, June 22, 2010

Insurer Aegon to sell Transamerica Reinsurance

AMSTERDAM — Aegon NV, the bailed-out Dutch insurer, said Tuesday it is looking to sell the life reinsurance arm of its U.S.-based subsidiary Transamerica and that it will restructure operations in Britain.

Transamerica Reinsurance is the third-largest life reinsurer in the U.S., and 7th globally, according to company materials. It wrote $1.93 billion in net premiums in 2008.

Aegon did not set a prospective selling price or discuss potential buyers in Tuesday’s announcement. Chief Executive Alex Wynaendts told reporters on a conference call he would also be willing to consider other options for disposing of the business, including selling just some of it and winding the rest down.

He said that there were “many parties interested” in buying the arm but it was too early for him to comment further.

Shares rose 3.1 percent to €5.10 in Amsterdam.

The company released the information as part of an update for investors on its corporate strategy, after the 2008 financial crisis, which includes refocusing company resources toward its life insurance, asset managment and pension businesses.

But Wynaendts said Aegon’s top priority is to repay the remaining €2 billion ($2.5 billion) of a €3 billion bailout package it received from the Dutch government in 2008.

He estimated his company’s annual free cash flow at €1 to €1.2 billion — less €600 million per year in costs from asset impairments, which the company assumes will be its normal rate in the future.

Annual “free cash flow is therefore around 600 million (euros), assuming normalized impairments and no changes in capital requirements,” Wynaendts said.

In May, the company reported first quarter net profit of €371 million ($471.1 million), from a loss of €173 million in the same period a year earlier. Asset impairments were €150 million.

Wynaendts said the Transamerica sale was “independent of the repayment of the remaining €2 billion to the Dutch state.”

But faced with direct questions from reporters, he did not rule out that the disposal was linked to Aegon’s ongoing negotiations with European Union regulators on penalties it must face for having taken state aid.

“I had hoped to be able to provide you with more details today, but unfortunately this whole process has been taking much longer” than hoped, he said.

He insisted Aegon wanted to sell the reinsurance business anyway, since — although profitable — it doesn’t fit with the rest of the company’s newly defined core businesses.

Aegon’s restructuring measures in Britain include cutting €80 million in costs, or 25 percent of the total, by the end of 2011. Wynaendts did not quantify job cuts among the company’s 4,900 British employees.

He said Aegon would probably take a restructuring charge similar to the amount of costs it plans to cut, in other words about €80 million.

Aegon said it plans to withdraw from the “bulk annuities” market in Britain, which it said it viewed as unprofitable due to poor pricing conditions.

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