Dutch headquartered life, pensions and annuities focused insurer Aegon has secured a €12 billion longevity reinsurance transaction with Canada Life Re, helping it to transfer more of its longevity risk to the benefit of its solvency measures.
Aegon had been pressured on a solvency basis, so securing this significant longevity risk transfer arrangement directly with a major provider of life and retirements reinsurance capital has helped the firm bring the Solvency II ratio of Aegon Netherlands more into line with expectations.
Canada Life Reinsurance entered into the long-term longevity reinsurance agreement with Aegon to provide coverage for €12 billion of its in-force liabilities, with around 200,000 in-payment and deferred pensioners set to be reinsured through the transaction.
The deal provides Aegon with full protection against the longevity risk associated with the €12 billion of liabilities, importantly covering both deferred and in-payment pensions and annuities related risks.
The contract incepts on December 31st 2019 and the reinsurance will remain in-force until the pension related portfolio runs off.
“This longevity reinsurance agreement is in line with our strategy to release capital from mature, spread‑based businesses,” explained Alex Wynaendts, CEO of Aegon. “Through this transaction we are freeing-up significant capital from our Dutch life insurance activities. This underscores our commitment to maintain a strong capital position in the interest of all our stakeholders.”
Aegon expects benefits to the Solvency II ratio of Aegon the Netherlandsof 10-12%-points, in-line with guidance it had provided, corresponding to a 5-6%-points increase in the Group’s Solvency II ratio.
It will cause a pre-tax hit to underlying earnings of around EUR 25 million per year, but the benefits to the company which has been actively looking to resolve its solvency status
Jeff Poulin, Global Head of Canada Life Reinsurance, commented on his firms role in the deal, “This transaction is the result of a great effort by both our team and Aegon’s team and highlights Canada Life Reinsurance’s strength as a partner for reinsurance longevity transactions globally”. Derek Popkes, Chief Operating Officer at Canada Life Reinsurance, added “We are delighted to grow and diversify our global longevity portfolio by working with Aegon to deliver a transformational longevity transaction tailored to their specific requirements. We will continue to innovate and work in partnership with our valued clients to deliver the best risk transfer solutions matching their objectives.”
Aegon has been involved in a number of longevity hedging transactions, as well as life securitisations, over the years, including longevity swaps, direct reinsurance such as this deal and other arrangements that were index-based and utilised the capital markets as a source of risk transfer capacity.
From 2015:
Canada Life Re provides reinsurance for Aegon’s €6bn longevity hedge.
Aegon completes third Dutch longevity hedge, covers €6bn of liabilities.
From 2013:
Aegon in €1.4Bn longevity risk transfer to capital markets and reinsurers.
From 2012:
Aegon and Deutsche Bank in record €12 billion longevity swap deal.
From 2009:
AEGON free up capital through $900m life securitization.
From 2008:
Aegon raises capital through innovative life insurance securitization.
Read all about this and many other transactions in our longevity swap, reinsurance and risk transfer deal directory.
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