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Insurance industry

Aegon Acquires Transamerica in Record-Breaking $9.7 Billion Deal

Strategic Insights

— 2 min read

The Dutch insurance giant Aegon NV has made a bold move to expand its presence in the US life insurance market with the acquisition of Transamerica Corp. for $9.7 billion in cash and stock. The acquisition, announced on February 18, 1999, will make Aegon the third-largest life insurer in the US, surpassing Lincoln National Life Insurance Co. and Jefferson-Pilot Life Insurance Co. to assume the top spot. This massive deal is part of a larger trend of European insurers expanding into the US market by acquiring US companies.

Key Takeaways:

  • Aegon NV acquired Transamerica Corp. for $9.7 billion in cash and stock, making it the second-largest US life insurance acquisition after American International Group Inc.'s purchase of SunAmerica for $18 billion.
  • The acquisition will increase Aegon's share of the US life insurance market from 2% to 3.5%.
  • Aegon will assume about $1.1 billion of Transamerica's holding company debt and expects to save $150 million before taxes annually in expense reductions after the first three years.
  • Transamerica's second-largest reinsurer in the US, with Aegon's financial strength, will enable Transamerica to expand its life reinsurance in Europe and add a variable life product to its repertoire.
  • The deal was financed 70% from the price of Aegon stock averaged over 20 days before the transaction closes, with the remaining 30% in cash.
  • Aegon's stock price improved to a high of $130 in January, and remains at about $100 today, which will reduce the number of shares needed to pay Transamerica.
  • Jason Zucker, an equity analyst with Bear Sterns, noted that the deal has opened the door for more acquisitions like this to follow, with companies like Lincoln National Life Insurance Co. and Jefferson-Pilot Life Insurance Co. seeing their stock rise 3.5% after the announcement.
  • Aegon has been selling off its non-life insurance-related business, with plans to sell Worldwide Insurance Co. and its property casualty subsidiaries to American Financial Group for $162 million.
  • Frank C. Herringer, chairman and chief executive officer of Transamerica, will join Aegon NV's executive board, bringing Transamerica's commercial finance, leasing and real estate information operations under his purview.
  • The combined operation will have its headquarters in San Francisco, with some functions continuing in their current locations.

Statistics:

  • Aegon NV will pay $9.7 billion in cash and stock to acquire Transamerica Corp.
  • The acquisition will increase Aegon's share of the US life insurance market from 2% to 3.5%.
  • Aegon will assume about $1.1 billion of Transamerica's holding company debt.
  • Aegon expects to save $150 million before taxes annually in expense reductions after the first three years.
  • Aegon's stock price is currently trading at $99, up 4.49%.
  • Transamerica's stock was trading at $72.9375, up 26.5%.
  • Aegon has sold off its non-life insurance-related business, including Worldwide Insurance Co. and its property casualty subsidiaries, for $162 million.
  • Aegon has also sold off Providian's property/casualty business to HFS Inc. for $3.5 million in 1997.

Sources:

  • "AEGON Acquiring Transamerica", COMTEX News, February 18, 1999 (http://www.comtexnews.com)
  • "Aegon to Acquire Transamerica in $9.7 Billion Deal", A.M. Best Company, February 18, 1999 (http://www.ambest.com)
  • "Aegon NV to Acquire Transamerica Corp.", PR Newswire, February 18, 1999 (http://www.prnewswire.com)

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