Aegon books €270m loss as it jettisons US life businesses to free up €630m of cash

 
Oliver Gill
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Aegon Classic - Day 4
Dutch firm Aegon does most of its business in the US (Source: Getty)

Dutch insurance giant Aegon has offloaded $14bn (£10.8bn) of US liabilities as it grapples with the challenge of boosting its capital buffers.

The insurer, which does most of its business in the US, said today it will sell two of its life businesses to Wilton Re. The sale will force Aegon to book a €270m loss, but will free up €630m of regulatory capital.

Aegon's Solvency II ratio, how much cash EU insurers must hold to cover insurance losses, was boosted by six per cent. The ratio is a focal point for many analysts, with poorer ratios shackling insurance firms' dividend policy.

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Aegon chief executive Alex Wynaendts said: "This transaction is in line with our strategic objective of accelerating the release of capital allocated to these businesses and will further enhance the financial flexibility of the group.

"We are confident that this agreement is also in the best interests of our customers, as Wilton Re is a highly respected reinsurer in the market."

The two businesses, Bank Owned and Corporate Owned Life, are Aegon's largest run-off businesses in the US.

The deal comes as other City firms have ditched life books in order to bolster regulatory ratios.

Read more: Deutsche takes losses and raises cash to pay its bills

Run-off aggregator Phoenix picked up two huge life books in 2016 - Sun Life from Axa and Abbey Life from Deutsche Bank. Phoenix paid a premium of £375m for the Sun Life book and almost £1bn for Abbey Life.

"Solvency II is likely to be a key driver [of deals] in the coming months and years," said Shore Capital Markets analyst Eamonn Flanagan.

He added the other two main insurance aggregators in the UK, Chesnara and Randall & Quilter, are likely to be "very excited" at the prospects of future deals.

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