Netherlands’ insurer AEGON’s aggressive growth
strategy, which has been characterised by a spate of acquisitions
and new alliances in recent months, was taken another step forward
in August with the announcement that it was to acquire US
investment bank Merrill Lynch’s two life insurance companies,
Merrill Lynch Life Insurance Company and ML Life Insurance Company
of New York, for $1.3 billion in cash.

AEGON expects to receive $425 million in surplus
capital in the form of a dividend from the two insurance companies,
leaving the net purchase price at $875 million.

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

A key element of the deal is the formation of a strategic business
relationship under which AEGON will supply insurance and investment
products through the two Merrill Lynch life insurance companies in
question. AEGON noted the relationship would be particularly
important for its Transamerica unit, giving it access to Merrill
Lynch’s distribution network for variable annuities.

A broad strategy

Merrill Lynch is the largest wirehouse (multi-branch insurance
broker) in the US and in 2006 sold a total of $6.4 billion in
variable annuities. Of the total, more than $800 million was sold
via the two life insurance subsidiaries AEGON will be acquiring.
The alliance, said AEGON, formed part of a broader strategy to
extend its commercial reach in the US with the help of strong
distribution partners. In addition, said AEGON, the alliance will
help it save about $10 million before tax in annual costs.

AEGON Americas, its holding company for subsidiaries in the US,
Canada and Mexico, is already AEGON’s largest unit and in the six
months to 30 June 2007 reported pre-tax operating earnings of €1.08
billion ($1.35 billion), 78 percent of the group total. Total
revenue generated by AEGON Americas in the first half of 2007
amounted to €7.79 billion, 39 percent of the group total.

The deal with Merrill Lynch came soon after AEGON announced it was
to undertake a €1 billion share buyback. The buyback would not
hamper its ability to undertake more acquisitions, said
AEGON.