Life insurance group Aegon NV is planning to merge Transamerica Advisors Life Insurance Co. with Transamerica Life Insurance Co. in 2019 as it continues to simplify its legal structure in the U.S.
Group CEO Alex Wynaendts told analysts at an investor day Dec. 6 in New York that the move "is expected to generate a one-time capital benefit of approximately $200 million as a result of diversification benefits."
The merger is the latest in a series of moves by Aegon to rationalize its U.S. structure. In September, it announced it was combining its Arizona-based variable annuity captive with Transamerica Life Insurance Co., which resulted in a $1 billion one-off benefit. Wynaendts told analysts that tidying up the legal structure had three benefits: simplification, additional expense savings and capital releases.
Hits and misses
The CEO also revealed that Aegon's U.S. operations would fall "somewhat short" of a $300 million expense saving target by the end of 2018, but added that it would be made up elsewhere and that the company was "well on track" to hit its €350 million groupwide target by the end of the year.
He also noted that the company had faced "headwinds" in hitting its 10% return on equity target. The company pumped €1 billion into its Dutch operations in 2017, leading to higher-than-expected capital levels, slower-than-expected sales and delays in the integration of the Cofunds platform in the U.K., which Aegon bought from Legal & General Group PLC in January 2017.
"Despite these headwinds, we have been able to increase our group return on equity, and have made significant progress towards achieving our 10% target," he said.
Buying and selling
As well as simplifying its legal entities, Aegon has also been exiting noncore markets, such as the Czech Republic and Slovakia, and cutting noncore business in its main countries, such as annuity business in the U.K. Wynaendts told analysts that such portfolio rationalization will continue, and he reiterated comments at the half-year results release that Aegon is "exploring the various options" for its Japanese joint venture AEGON Sony Life Insurance Co. Ltd.
He also repeated that although Aegon's focus is on organic growth, it would examine potential acquisitions in the Netherlands that made sense. Wynaendts noted that the company had "passed" on Loyalis NV, a provider of disability insurance now in the process of being acquired by ASR Nederland NV.