Aegon strikes deal with RGA to reinsure longevity risk in pensions

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REUTERS/Wolfgang Rattay

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AMSTERDAM, Dec 15 (Reuters) - Aegon, the Dutch insurer, said on Wednesday it has struck a deal with Reinsurance Group of America (RGA) to hedge the risk that people in its Dutch pensions business will live longer than expected.

The move "improves the risk profile of this business and is another step to generate stable, regular, and reliable cash flows," said CEO Lard Friese in a statement.

Aegon said under the deal "initially" it would sacrifice 40 million euros ($45 million) in operating capital generation at the business, but the move would help "de-risk" its business, leading to a 15% improvement in its Dutch Solvency II ratio.

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That in turn will enable it to upstream an extra 25 million euros in remittances from its Dutch business to the group level each quarter starting in 2022, the company said.

And "the impact on operating capital generation...will decrease over time," Aegon said in a statement.

The company undertook a similar move hedging longevity risk in its life insurance business in 2019 which has helped lead to a re-rating of shares as the company's results are becoming less volatile.

Aegon shares closed at 4.047 euros on Tuesday, up 26% in the year to date.

($1 = 0.8876 euros)

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Reporting by Toby Sterling, Editing by Louise Heavens

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