SCOR to Buy Aegon’s Transamerica Reinsurance Unit for $913 Million

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French reinsurer SCOR is set to pay $913 million for most of Dutch insurer Aegon’s Transamerica Reinsurance operations. When concluded, the combined companies would become the second largest life reinsurer in the U.S.

Aegon, which has been winding down and selling operations after requiring state aid at the height of the credit crisis in 2008, said on Tuesday the disposal would help it repay outstanding aid of €1.125 billion ($1.644 billion).

The deal is the latest in a round of consolidation in the North American life reinsurance market, as companies try to position themselves for a rebound after the financial crisis.

Last October, Warren Buffett’s Berkshire Hathaway agreed to buy Canadian insurer Sun Life Financial’s reinsurance business.

Europe is SCOR’s biggest market and Transamerica will boost its market share in the United States, where it currently earns less than 30 percent of its global life reinsurance premiums.

“With the acquisition of a major mortality risk reinsurance portfolio in the United States, SCOR aims to further increase its geographical diversification,” it said.

SCOR, which also sells property and casualty reinsurance, eclipsed Reinsurance Group of America as the lead bidder for Transamerica in March, according to sources familiar with the matter.

“The good news for SCOR is that the price is pretty good, and there is no capital increase,” said Francois Boissin, analyst at Exane BNP.

SCOR said it would pay for the deal through its own funds and a potential debt issue of around €200 million [$292 million], without the issuance of any new shares.

SCOR shares rose 0.5 percent to €19.51 [$28.50] and Aegon was up 2.6 percent at €5.35 [$7.82] by 0712 GMT. The STOXX Europe 600 Insurance index stood 0.4 percent higher.

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Aegon said the deal consisted of cash proceeds of $0.9 billion with a further $0.5 billion in capital released. Aegon expected to transfer $1.1 billion to the holding company to support the repurchase of the remaining Dutch state aid.

The Dutch insurer, which got a total of €3 billion [$4.38 billion] state aid from the Netherlands in 2008, still needs to pay back €750 million [$1.1 billion] plus a 50 percent premium — €1.125 billion [$1.644 billion] in total. It expects to pay it back by the end of June.

Aegon announced its plan to sell Transamerica Re in June last year, when it also said it would end some UK operations. It sold its Dutch funeral insurance operations in 2010 and has been running down its U.S. spread-based business since 2009.

“If they hadn’t been rescued by the state I don’t think they would have sold the (Transamerica Re) unit,” analyst Boissin said.

The possible sale of Transamerica Re, which Aegon has owned since 1999 when it bought U.S. insurer Transamerica for $9.7 billion, was part of its strategy to reduce risks and focus on its activities of life insurance, pensions and asset management, Aegon said last year.

SCOR said it would take over Transamerica Re’s mortality business, which had $2.2 billion in gross written premiums last year, of which 87 percent was generated in the United States.

The deal excludes Transamerica Re’s structured solutions and fixed and variable annuities, which were not in line with its strategic orientations, SCOR said.

The transaction is expected to close this summer.

BNP Paribas and Citi have been acting as financial advisers to SCOR, Deutsche Bank as advisor for collateral financing aspects, and Skadden, Arps, Slate, Meagher & Flom LLP as legal advisers, SCOR said.

(Additional reporting by Aaron Gray-Block in Amsterdam, and Lionel Laurent in Paris; Editing by Dan Lalor and Hans Peters)