AEGON has agreed to sell its Taiwanese life insurance business based on a valuation of approximately EUR 65 million, as per the end of 2008, to Zhongwei Company.
“Our decision to divest our Taiwanese life business is a result of AEGON’s strategic priorities to optimize capital allocation and returns, announced last June,” says AEGON CEO Alex Wynaendts. “AEGON continues to view Asia as an important growth market. We will focus our attention on further developing AEGON’s Asian platform which we believe offers significant growth and return prospects in the coming years. We are grateful to the management and staff of AEGON Taiwan who have worked very hard in recent years to improve our operations while providing our customers in Taiwan with quality products and services.”
The sale will result in a total negative earnings impact of approximately EUR 400 million in the second quarter of 2009, resulting in a charge of approximately EUR 300 million to shareholders’ equity. AEGON expects the sale of its life insurance activities in Taiwan to positively impact future earnings. In 2008, AEGON Taiwan recorded a net loss of EUR 103 million. At the end of 2008, AEGON Taiwan’s embedded value was approximately EUR 70 million.
The sale has no impact on AEGON’s excess capital position and only a limited impact on AEGON’s IGD ratio. At the same time, the scheduled capital contributions to AEGON Taiwan will no longer be required after completion of the transaction. As a result, the transaction will have an immediate positive effect on Group cash flows. In addition, the sale will result in a significant decrease of the long-term interest rate exposure for AEGON, which, in turn, substantially lowers required economic capital.
As of December 31, 2008, AEGON’s Taiwanese life business had a risk based capital ratio of above 300% under local solvency requirements. As part of the transaction, AEGON and the consortium have agreed that, until closing, they will ensure that the business continues to have adequate capital to meet the Taiwan solvency requirements.
AEGON’s sales agreement with the consortium is subject to regulatory approval and is expected to close by the end of the third quarter of 2009.
D.C.