Aegon raises capital through innovative life insurance securitization

Aegon has announced that it has successfully completed a transaction to help it raise capital through realising profits early on a book of life insurance policies. The deal will release approx EUR 315m by delivering profits from some of it’s life policies held with Aegon Scottish Equitable now, in return for the profits which arise from those policies in the future. The deal has been rated as a single ‘A’ investment by Fitch Ratings.

The deal was structured by Barclays Capital and is known as a ‘value in force’ securitization. Aegon will have the opportunity over the next three years to contribute further new policies to the deal to keep the financing flowing.

This insurance linked security is slightly unusual as the transaction was private which helped Aegon avoid some regulatory hurdles. It was also the first time that pension payments from an open fund have been sold to private investors.

At a time of economic uncertainty such as we are experiencing now, this is a great deal for Aegon and helps them to remain capitalised without having to release a rights issue as so many other banks and insurers may do. It’s a great way to get assets off the balance sheet while at the same time taking advantage of institutional investors lack of appetite for other securities such as credit. Expect to see more deals like this both from Aegon and other insurers!