In a move that will propel it
into second position in the US life reinsurance market, French
reinsurer SCOR is to acquire Transamerica Re from Dutch insurer
Aegon for $912.5m.
For Aegon, the sale will also
result in an additional $500m in capital being released and enable
it to repay the Dutch government the remaining €750m ($1bn) of the
€3bn it received in emergency assistance in October
2008.
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The purchase price represents
a 46% discount to Transamerica Re’s book value of $1.7bn at the end
of 2010 and a price to earnings ratio of 9.1 based on the
reinsurer’s net profit of $102m in 2010. SCOR noted that the deal
will be financed through the use of its own funds and a possible
limited debt issuance.
Under the agreement with
SCOR, Aegon will transfer to SCOR $1.8bn of liabilities and
corresponding assets in cash and/or securities in line with SCOR’s
investment policy. Aegon will in addition maintain about half of
the collateral requirements needed for reinsurance reserve
financing over the next 15 years.
The transaction excludes
Transamerica Re’s other activities – structured solutions and fixed
and variable annuities – which SCOR noted are not in line with its
strategy. In line with this part of the agreement, Aegon will
retain business with a book value of $400m, comprising mainly
variable annuity guarantees.
According to SCOR, its life
reinsurance volume will be increased by just over 50% through the
acquisition of Transamerica Re, which in 2009 ranked as the
third-largest life reinsurer in the US based on recurring new
business volume.
In 2010, Transamerica Re
recorded gross written premiums of $2.2bn of which 87% was
generated in the US. Based on net earned premiums, Transamerica Re
was the world’s seventh-largest life reinsurer in 2010.
Aegon has owned Transamerica
Re since 1999 when it purchased Transamerica Corp for
$10.8bn.
Outside the US, Transamerica Re has operations in Mexico,
Chile, Bermuda, Ireland, France, Spain, Korea, Japan, Taiwan, and
Hong Kong.
