Under the terms of the sale, originally announced in February, Aegon will reinsure £6bn ($8.5bn, €7.4bn) worth of liabilities to Rothesay, with the transfer expected to be complete by 2018.
As a result, Aegon expects to make a loss of around £30m for the second quarter, with cash flows from its UK operations dipping by around £35m.
In a statement released on Monday, Aegon said it was selling off such a large chunk of its annuity portfolio in order to focus on its platform, with plans to dispose of the rest in due course.
The life insurer added it has not been an active player in the UK annuity market since 2010, although Aegon confirmed it will continue to make annuity payments to customers on behalf of Rothesay until the sale goes through.
Alex Wynaendts, chief executive of Aegon, said: “This is an important step in the process to fully divest our UK annuity portfolio, and will enable us to focus on our fast-growing platform in the UK.
“We are confident that this transaction is also in the best interests of our annuity customers, as Rothesay Life is an established and respected specialist provider in the UK annuity market.”
Annuity market turmoil
The sale comes during a difficult time for the annuity market in the UK.
In 2014, the chancellor George Osborne announced reforms granting unrestricted access to pension savings – scrapping the need for people to buy an annuity.
As a result, UK annuity sales plunged 42% from £11.9bn in 2013 to £6.9bn in 2014.
However, recent research published in March by the Association of British Insurers (ABI), found that annuities are beginning to bounce back after their post-freedom fall and are now almost on par with drawdown sales.
The data based on the last quarter of 2015, found that £3.3bn has been invested in around 61,700 annuities in the UK – compared with £4.2bn invested in 63,400 income drawdown products.
