Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., may consider selling its life reinsurance unit and said it plans to cut costs in the UK as it seeks to boost earnings.

“Aegon believes that, over the longer term, there is only a limited strategic fit between Transamerica Reinsurance and its core activities,” The Hague-based company said today. The insurer said it has begun exploring options for the unit, which has a book value of 1.6 billion euros ($2 billion), including finding a suitable buyer who would regard reinsurance as core to its business.
The company set additional earnings targets in June 2008, three months before New York-based Lehman Brothers Holdings Inc. filed for bankruptcy and financial markets collapsed. Aegon aims to cut 25 percent of costs in the UK by the end of 2011 and increase the return on capital and withdraw from the country’s bulk annuities market, it said.
“The UK is a difficult market,” Chief Executive Officer Alex Wynaends said in a video transcript on the company’s website. “We’ve come to the conclusion in the current market environment that the best value for shareholders is to implement a restructuring and that’s what we’re doing.”
Aegon, which got 3 billion euros in aid from the Dutch government in 2008 and repaid one-third of the money in November, has climbed 12 percent to 5.10 euros in Amsterdam trading this year, valuing the company at 8.86 billion euros. That compares with a 1.3 percent drop in the 34-member Stoxx Europe 600 Insurance Index.
European insurers including Axa SA and Prudential Plc are seeking to free up capital reserves used to back policies in slower-growing markets like the UK to fund growth in Asia, where margins are wider. Paris-based Axa, Europe’s second- biggest insurer, said on June 14 that it’s in talks to sell part of its UK life insurance unit to Clive Cowdery’s Resolution Ltd. for 2.75 billion pounds ($4.1 billion).
Aegon, whose origins date back to 1759, is preparing to sell its British life and pensions business, including Scottish Equitable, for 1.5 billion pounds, the Mail on Sunday reported June 20, without saying where it got the information.
A “full disposal would be at a significant discount to its value,” Wynaendts said.
(Source: Bloomberg)