Insurance: AEGON sells Taiwan unit
Netherlands based AEGON, the global insurance company, has completed the sale of its Taiwan life unit announced in April this year. Given AEGON's reasons for the disposal, one has to wonder why someone would pay for it.
The purchaser of the unit is a newly formed holding company called Zhongwei Company Ltd., a holding company established and funded by a consortium led by the Chairman of Meifu Development and the President of Taiwan Glass Industry. Meifu Development is one of Taiwan's leading property, construction and real estate management companies. Taiwan Glass Industry, listed in Taiwan, is one of the world's largest manufacturers of glass.
AEGON announced the reasons for the sale in a release. It says:
The decision to sell the Taiwanese life business is a result of AEGON's strategic priorities to optimise capital allocation and returns.
The sale resulted in a total negative earnings impact of EUR 385 million in the second quarter of 2009. AEGON expects the sale of its life insurance activities in Taiwan to positively impact [upon] future earnings. The sale has no impact on AEGON's excess capital. At the same time, the scheduled capital contributions to AEGON Taiwan will no longer be required. As a result, the transaction will have an immediate positive effect on the Group's cash flows. In addition, the sale results in a significant decrease of the long-term interest rate exposure for AEGON, which, in turn, substantially lowers required economic capital.
So, let's get this straight: getting rid of the business makes more profit for AEGON, it has not added anything to the company's capital, the Taiwan business was a cashflow drain and selling it has allowed the company to pay down some of its long term debt.
Are we missing something here? It sounds as if the business may have been viewed as a candidate for insolvency rather than sale.
AEGON did not reply to our request for additional information.
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