Following in the footsteps of Prudential PLC and ING Groep NV, Aegon NV announced yesterday it would sell its Taiwanese life insurance unit to local investors, as the Dutch insurer expects the deal will have a positive impact on its cash flow and future earnings.
In a statement earlier yesterday, Aegon said it agreed to transfer its local business to Taipei-based consortium Zhongwei Co (中瑋一) for 65 million euros (NT$3 billion).
Zhongwei is a holding company established by Tom Peng (彭誠浩), chairman of Meifu Property Development Group (美孚建設集團), and Lin Por-fong (林伯豐), president of Taiwan Glass Industry Corp (台灣玻璃).
The selling price is compared with an embedded value, including assets, of about 70 million euros and a net worth of 104 million euros, Aegon Life Insurance (Taiwan) Inc (全球人壽), Aegon’s local subsidiary, reported at the end of last year.
The deal is expected to be completed by the end of third quarter, pending regulatory approval, the company said.
“Our decision to divest our Taiwanese life business is a result of Aegon’s strategic priorities to optimize capital allocation and returns announced last June,” Alex Wynaendts, chief executive officer of Aegon, said in the statement.
The Hague-based company said yesterday the sale would result in a total negative earnings impact of about 400 million euros in the second quarter. After completion of the transaction, the firm estimates to take a charge of about 300 million euros in shareholder equity.
Aegon began its operations in Taiwan in 1993, but has been unprofitable for the past three years. The local subsidiary, which employs approximately 500 local staff and 750 agents, recorded a net loss of 103 million euros last year, company statistics showed.
Aside from a change in shareholding structure, Zhongwei said it would retain the name of Aegon’s local operation for a while and would continue protecting the interests of its local policy holders. It would also retain current staff and management, led by James Liu (劉先覺), chief executive officer of Aegon Life Insurance (Taiwan), the company said in a separate statement.
In addition, the Taiwanese consortium intends to raise at least NT$10 billion (US$295 million) for Aegon’s local operation, on top of its capital of NT$27 billion, it said.
As part of the transaction, the two sides have agreed to ensure that Aegon Taiwan continues to have adequate capital to meet regulatory solvency requirements in Taiwan until closing of the deal.
As of the end of last year, Aegon’s local operation had a risk-based capital ratio above 300 percent, higher than the 200 percent required by the regulator.
The Dutch firm’s decision came after Prudential of the UK sold the assets and liabilities of its local arm to China Life Insurance Co (中國人壽) for the nominal sum of NT$1 in February and ING of the Netherlands announced in October that it would sell its Taiwanese subsidiary to Fubon Financial Holding Co (富邦金控) for US$600 million through stock swaps.
Some international insurers, however, have expanded their investments in Taiwan during the same period of time.
In December, Zurich International Life Ltd (蘇黎世國際人壽) launched its Taipei office with initial capitalization of NT$200 million. In January, French-based BNP Paribas SA set up a life insurance joint venture with Taiwan Cooperative Bank (合作金庫銀行) with an initial capital of NT$2 billion, and Sony Life Insurance Co gained regulatory approval last month to set up a representative office in Taiwan, the first to do so among Japanese life insurers.