Dutch headquartered life, pensions and annuities focused insurer Aegon has secured longevity reinsurance to cover a €7 billion of pensions from Reinsurance Group of America (RGA).
The company said that the longevity reinsurance transaction improves the risk profile of its Dutch business, while also freeing up capital at attractive terms, with these actions and others taken against its Dutch pension business set to increase regular remittances for Aegon. Quarterly remittances are expected to increase from €25 million to €50 million per quarter as of the first quarter of 2022.
The longevity reinsurance agreement will cover Aegon against the longevity risk associated with €7 billion of pension liabilities, effective from December 31st 2021.
The lonegvity reinsurance protection will continue until the reinsured block of business has run off in full, Aegon explained and the transaction includes deferred pensioners as well as in-payment policies of pensioners and dependents, which results in a very long run-off period.
It covers Aegon against the financial impact of longevity risk over the full life of the policies at an attractive cost of capital, the firm said.
Combined, almost 40% of the longevity risk exposure of the Dutch life business has now been mitigated for Aegon thanks to these reinsurance agreements.
“This longevity reinsurance agreement is another bilateral action taken to maximize the value of our Dutch Life business,” explained Lard Friese, CEO of Aegon N.V. “In line with our strategy, this builds on actions we have previously taken to improve the risk profile of this business and is another step to generate stable, regular, and reliable cash flows from the Dutch Life business.”
It’s expected to benefit Aegon’s Dutch Life business Solvency II ratio by around 15%-points, which equates to a roughly 5%-point increase in the Group’s Solvency II ratio.
Operating capital generation of will initially be reduced by €40 million per year and the IFRS operating result will decrease by less than €15 million per year, Aegon said, with these impacts to operating capital generation and the operating result set to slow over time, in line with the maturity of the reinsured portfolio.
“We value our long-standing relationship with Aegon, and we are proud to continue to collaborate with them to help them to actively manage their risk and capital position,” commented Simon Wainwright, Executive Vice President, Head of EMEA, RGA. “Partnering with our clients to create customized solutions has led to a standout year in the Netherlands, and we look forward to continued growth in our longevity business in continental Europe.”
“RGA is a strategic partner for Aegon globally and in the Netherlands,” added Allegra van Hövell-Patrizi, CEO of Aegon the Netherlands. “Their local team, with in-depth knowledge of the market supported by their global experts, worked closely with us to tailor the agreement to meet our specific needs, and we appreciate their dedication in executing this transaction.”
Read all about this and many other transactions in our longevity swap, reinsurance and risk transfer deal directory.