Aegon ends UK annuity work with £3bn sale to L&G

Life and pensions group Aegon UK has sold its £3 billion UK annuity portfolio to Legal & General in a deal which completes its withdrawal from the sector.

Adrian Grace, chief executive of Edinburgh-based Aegon UK. Picture: Contributed

Yesterday’s move came following the sale of a £6bn chunk of its annuity portfolio last month to Rothesay Life. The latest agreement covers about 27,000 policyholders who will remain customers of Edinburgh-based Aegon UK until the deal gets regulatory and court approval.

Edinburgh-based Aegon UK said the sale of the remaining part of UK annuity portfolio would free up capital from a non-core business and supports its strategy to focus on growing its platform arm which enables workplace savers and consumers to build their savings across their working lives.

Chief executive Adrian Grace said: “Having not been an active player in the annuity market since 2010, it made perfect sense to sell a non-core element of the business and allow us to further accelerate the growth of our platform and protection businesses.”

Grace said the divestment of the annuity portfolio “significantly reduces Aegon’s exposure to both longevity and credit risk”.

“The transaction is in line with the company’s continued shift to capital-light businesses,” he added.

In 2010, Aegon flagged it was planning to withdraw from the UK annuity market as it believed these products did not meet its long-term risk adjusted return requirements.

The group expects annual capital generation from its UK operations to be reduced by approximately £30 million following the deal. Underlying earnings before tax are expected to be reduced by approximately £16m a year. The expected Solvency II capital release following the completion of the transaction is approximately £275m.

Kerrigan Procter, managing director of Legal & General Retirement, said: “We are delighted Aegon has chosen Legal & General to secure its policyholders’ annuities.”

The financial terms of the deal were not revealed, but RBC Europe analyst Gordon Aitken said: “Aegon wishes to offload the annuity book to fit with its strategy, so we expect L&G was able to drive an attractive price.”