SCOR Completes Acquisition of Transamerica

Posted on Aug 11, 2011 by Sergio Ulloa (G+)

On Wednesday, French insurance group SCOR announced that they had finalized the acquisition of Transamerica Re, a life reinsurance division of Aegon, for US$912.5 million. Life reinsurance is a growing business line that helps individual insurance companies pool their risks, and accounted for almost 40 percent of Scor's operating profit in 2010. Following final approval from all relevant regulatory authorities, Scor will become the second-largest life reinsurance company in the United States. The deal, in development since April 26, 2011, sees the Netherlands-based Aegon divest from the majority of its global life reinsurance activities, transferring some US$1.8 billion worth of assets, securities and corresponding liabilities to Scor. Half of the mortality portfolio transferred will be in cash and US treasury bonds with the remainder comprised of investment grade corporate bonds selected individually by Scor. According to a statement released by the Dutch company this week, the total cost of the transaction will be US$1.4 billion after tax, made up of US$900 million in cash from Scor and a further US$500 million in capital released. The select reinsurance businesses still retained by Aegon after this deal will be comprised largely of variable annuity guarantee operations. Aegon acquired Transamerica Re in 1999 as part of its US$10.8 billion purchase of Transamerica Corporation. The Charlotte, North Carolina-based reinsurance company now covers operations in USA, Europe and Asia and employs 451 people. Transamerica Re annually writes roughly US$2 billion in gross premiums and last year reported underlying earnings before tax of US$105 million. The company has been successful, with nearly a trillion dollars worth of life reinsurance now in force worldwide, and remains a market leader in the annuity, risk management, capital release market and other lines in reinsurance business. Now that the acquisition has been finalized, Transamerica Re's existing management and employees will be reorganized and join the Scor Global Life team to form a combined entity, titled SCOR Global Life Americas, which will be managed by former President of Transamerica, Paul Rutledge. Mr. Rutlegedge will also join Scor's executive committee. The Transamerica Re operations based outside of America will incorporate within their local SCOR Global Life office. Scor have already defined their Global Life operational and functional responsibilities for each market. Scor has been quick to assure both their clients and Transamerica's that a smooth transition was underway and that policyholders would soon benefit from the reinforced service offered by the combination of their two businesses, without any disruption to existing coverage and support. According to Scor, the acquisition of Transamerica Re will expand their life reinsurance business considerably, boosting the total volume of premiums by nearly 50 percent overnight. The biggest impact will be felt in the United States, a lucrative reinsurance market that accounted for 87 percent of Transamerica Re's underwriting business in 2010. Scor has been looking to strengthen its position in major life reinsurance markets like the US as part of the company's 2010-2013 strategic plan, titled "Strong Momentum." The plan broadly targets improved profitability and solvency and a rebalance between life and non-life contribution inside Scor's portfolio. In accordance with this strategy, Scor agreed to sell its US fixed-annuity business for US$55 million in February 2011 in order to free up capital for expansion of its core life reinsurance businesses. The French reinsurer has also recently acquired the entire capital of Solareh SA, in a move to better develop value added services for its insurer clients. For Aegon meanwhile, the decision to divest from Transamerica Re is consistent with its revamped focus on growth and earnings within their core business of life, pension and asset management, all while improving upon its risk-return profile. Aegon, with significant exposure to mature American and European markets, was one of the hardest hit multinational insurers when the financial markets collapsed in 2007-2008, and called upon the Dutch government for a bailout to avoid a complete collapse. Earlier in the year, Aegon planned to use the funds it would receive from Scor to complete a final €1.12 billion (US$1.61 billion) payback to the Dutch state. However, on July 15 the company announced that all outstanding payments to the state, a total value of €4.1 billion (US$5.89 billion), had already been completed. With that burden now lifted, Aegon can devote its energy and significant resources to both streamline its operations in the West and attempt to capitalize on the rapidly developing insurance markets in the East. Insurance Companies Mentioned AEGON 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 Transamerica Reinsurance is a division of Transamerica Life Insurance Company, formerly an AEGON company. It is one of the largest life reinsurance companies in the US, 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 Scor is organized through two main businesses - SCOR Global P&C and SCOR Global Life - which are leading underwriting and reinsurance providers. The group writes business in Europe, Latin America, Asia, the Middle East and the USA.