(By Balaseshan) British insurer Aviva Plc (NYSE: AV) said it has agreed to sell its U.S. life and annuities business and related asset management operations to Bermuda-based insurance holding company Athene Holding Ltd. for $1.8 billion.
Aviva will retain the North American asset management activities of Aviva Investors that are focused on third parties, and Aviva Plc assets outside of the USA. Aviva will receive sale proceeds of $1.55 billion in cash, after the repayment of external debt.
Of this, an amount of up to $250 million may be received in the form of an interest-bearing vendor loan, repayable in cash within 12 months of completion.
Aviva said cash proceeds will increase central group liquidity and will be used for general corporate purposes.
"The sale of Aviva USA is an important step forward in the delivery of our strategic plan. It considerably strengthens Aviva's financial position, increases group liquidity and improves our economic capital surplus whilst also reducing its volatility," said John McFarlane, chairman of Aviva.
Upon closing, the combination of Aviva USA and Athene Holding's primary U.S. operating subsidiary, Athene Annuity & Life Assurance Co., a Delaware-domiciled insurer focused on retail fixed and indexed annuity sales and reinsurance, will result in the second largest issuer of fixed indexed annuities in the United States.
Athene said Aviva USA, to be renamed Athene USA, will be the parent for Athene's U.S. operations and will be headquartered in West Des Moines, Iowa. Recently, Athene received a $621 million capital infusion in anticipation of the transaction and expects to have over $3.5 billion of combined statutory capital within its insurance company subsidiaries following the transaction.
Athene, which is focused on becoming the leading U.S. fixed annuity company, is evaluating strategic options with respect to Aviva USA's life insurance operations. The transaction is expected to close in 2013.
Goldman, Sachs & Co. and Morgan Stanley and Co. International Plc acted as financial advisers to Aviva. Athene was advised by Deutsche Bank Securities Inc., Lazard and Sidley Austin LLP on the transaction.
AV closed Thursday's regular session up 2.43% at $12.63. The stock has been trading between $7.78 and $12.63 for the past 52 weeks.