Posted on Mar 10, 2011 by Sergio Ulloa
The French reinsurer specialist Scor is emerging as the front runner to take over troubled insurers Aegon's reinsurance arm Transamerica Re.
Early reports indicate that Scor Reinsurance is now ahead of US rivals, the Reinsurance Group of America
(RGA), in the pursuit to acquire Transamerica, with Aegon keen to offload its reinsurance business in order to raise funds to repay the Dutch government for a bailout loan.
If the deal is successfully completed the funds will be used to help repay the remaining €2.25 billion (US$3.1 billion) borrowed by Aegon from Dutch taxpayers at the height of the global financial crisis.
Aegon, which is highly exposed in the mature but stagnant insurance markets in the USA, UK and the Netherlands, was one of the hardest hit global insurers when the financial markets collapsed in 2007-2008, with the Dutch government called upon to avoid the multinational insurer's demise.
Potential suitors, Scor, reported net income growth of 13 percent in 2010 to reach €418 million (US$576.8 million), with premium income amounting to €6.7 billion (US$9.2 billion) last year. The French reinsurer is understood to be seeking to bolster its network by acquiring Transamerica in a bid to progress global growth and asset creation.
When Scor announced its results for 2010, the insurer stated that its strategic plan provided for growth in the life insurance industry by increasing its exposure in this sector of business. In February 2011, Scor sold its US fixed annuity business - Investors Insurance Corporation (IIC) for €39.6 million (US$55 million) - in order to release capital for expansion of its core life reinsurance businesses. The complete exit from the annuity business being part of the company's strategic plan entitled "Strong Momentum" a programme for 2010-2013.
Aegon's capital generation programme has already seen the insurer issue shares which raised €900 million (US$1.2 billion) in a move to create funds to partially repay the Dutch government for its bailout loan, which the company has targeted for completion by the end of June 2011.
Aegon intends to use any surplus capital from the sale of Transamerica to invest and strengthen its core markets in a bid to return to growth and establish a stronger market position.
The Dutch insurer has struggled to generate profitable business in recent years, being heavily exposed in the USA and UK markets where trading conditions have been particularly challenging. Aegon reported that net earnings in the fourth-quarter 2010 declined from €393 million (US$541 million) achieved in 2009 to €318 million (US$438 million)
. The fall of 19 percent in year-on-year profitability reflects Aegon's high dependency on writing most of its existing business in stagnant markets.
However, Aegon has said that it is aiming to place more focus on the flourishing Asian markets in a bid to capitalize on the rapidly expanding economies in this region of the world. Additionally, Aegon intends to streamline its operations in existing markets in western hemisphere countries by refocusing on core business activities.
Transamerica Re has network coverage in the USA, Europe and Asia and annually writes approximately US$2 billion in premiums. The company has nearly a trillion dollars of life reinsurance in force and is a market leader in the annuity, risk management, capital release market and other lines of reinsurance business.
During 2010, Scor was able to strengthen its position in reinsurance markets and extend its presence and range of business internationally. One of its main goals was to gain access to the lucrative Chinese life insurance sector; last year Scor was granted a licence to start writing life reinsurance business in China, in addition to the group's non-life insurance lines.
On the basis that Scor acquires Transamerica Re in 2011, it will enhance the French reinsurer's presence in the reinsurance industry and provide scope for increased market penetration in the life insurance sector.
Insurance Companies Mentioned:
AEGON is present in more than 20 countries in the Americas, Europe and Asia, employing 28,000 people and serving more than 40 million customers. AEGON's ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably. AEGON products include life, pensions, life reinsurance, individual savings & retirement products.
Transamerica Reinsurance is a division of Transamerica Life Insurance Company, an AEGON company. It is one of the largest life reinsurers in the U.S., offering broad capabilities in risk, capital and expense managements to help companies improve the competitiveness and profitability of their life and annuity products. Transamerica Reinsurance supplies automatic and facultative reinsurance, product consulting and development and alternative underwriting solutions to more than 500 companies in North America, Asia-Pacific, Latin America and Europe.
Scor is currently organized around two main businesses - SCOR Global P&C and SCOR Global Life - which are leading underwriting and reinsurance providers. In addition, the Scor group as an asset management arm - SCOR Global Investment. The group writes business in Europe, Latin America, Asia, the Middle East and the USA.
Reinsurance Group of America
The Reinsurance Group of America was founded in 1973 and is one of the leading global life reinsurance companies, with more than US$2.4 trillion of life reinsurance in force and assets of US$29 billion. RGA serves clients from 27 offices around the world, delivering expert solutions in life reinsurance, facultative underwriting, risk management, product development and capital-motivated reinsurance services.