And then there was one. Allianz’s recent decision to sell its U.S. life insurance unit leaves Aegon as one of the last major European insurers with a substantial book of American life business, as disparate regulatory regimes have reduced the diversification value of cross border holdings. How long will Aegon hold on?
Catalysts for Aegon to divest its U.S. life insurance business abound, according to one industry banker. Selling the unit would accelerate the company’s tilt toward a “capital light” operating model, freeing up capital currently required to meet regulatory requirements. The remaining company would also be composed of more property and casualty insurance, a segment that is typically awarded higher valuation multiples than life.
Private equity bidders might already be sharpening their pencils on the prospect—few blocks of life insurance are available for acquisitions, even as PE’s focus on sources of perpetual capital has increased buyer demand. Apollo’s purchase of Athene and KKR’s acquisition of Global Atlantic Financial Group are no longer outliers as PE firms double down, using those platforms to make further insurance sector acquisitions.
There is at least some reason to pause. A sale would mark a major turnaround for a business that generates the plurality of its earnings in the U.S. as of full year 2020. And management has said as much when asked in earnings calls about the potential to right-size the unit. But it’s been done before. Fellow European insurers Aviva and AXA exited their U.S. life units as well, and AXA subsequently completed its transformation into a P&C player by acquiring XL Group.
Private equity in search of permanent pools of capital could well consider an Aegon U.S. life insurance acquisition to better position Aegon for a similar pivot.
–Brandon Zero
