L&G picks up Aegon's remaining UK annuities business

(Updates with background, analyst comment)

AMSTERDAM, May 23 (Reuters) - Britain's Legal & General (LSE: LGEN.L - news) Group said on Monday it will buy 3 billion pounds ($4.4 billion) of annuity liabilities from Dutch insurer Aegon (Swiss: AGN.SW - news) .

Although the terms were not disclosed, analysts said L&G appears to have sealed a sweet deal, probably driven by Aegon's desire to improve its solvency ratio.

Aegon will book a 215 million pound (273 million euro) loss on the deal, but it will improve its group solvency ratio by 3 percentage points or more due to relatively heavy capital requirements for annuities under Europe's new Solvency II rules.

"Aegon wishes to offload the annuity book to fit with its strategy, so we expect L&G was able to drive an attractive price," RBC Europe analyst Gordon Aitken said in a note.

L&G shares were up 0.9 percent by mid-morning, while Aegon shares were off 0.7 percent.

Aegon's stock fell as much as 10 percent on May 12 when it reported first-quarter earnings showing company-wide solvency under Solvency II falling to 155 percent from 160 percent. .

Many analysts view the Solvency II ratio as a proxy for an insurer's ability to pay dividends.

Aegon said Monday's deal completes the divestment of its British annuities portfolio, "in line with the company's continued shift to capital-light businesses."

In April, Aegon sold Rothesay Life 6 billion pounds ($8 billion) of UK annuities. ($1 = 0.6886 pounds)

(Reporting by Toby Sterling; Editing by David Goodman and Adrian Croft)