Aviva Unit Said to Draw Apollo, Harbinger, Guggenheim Bids
September 30, 2012 by Zachary R. Mider, Kevin Crowley and Aaron Kirchfeld
By Zachary R. Mider, Kevin Crowley and Aaron Kirchfeld on September 29, 2012
Aviva Plc (AV/) got offers from Apollo Global Management LLC (APO), Harbinger Capital Partners and Guggenheim Partners LLC for a U.S. life insurance division it’s seeking to sell, said people with knowledge of the matter.
The unit may fetch more than $1 billion, said the people, who spoke on condition of anonymity because the talks are private. Some of the bidders have held talks with other investors, such as private-equity firms, about forming groups to share the cost of the purchase, the people said.
Apollo, Harbinger, and Guggenheim have been buying unwanted operations from life insurers since 2009, in part to get access to a stable pool of funds for their investment-management operations. At the same time, some of the biggest life insurers, such as Hartford Financial Services Group Inc. (HIG) and Sun Life Financial Inc., have stopped selling some U.S. life and annuity products.
Officials at Apollo, Guggenheim, Aviva and Harbinger declined to comment.
Aviva, the U.K.’s second-biggest insurer by market value, is selling or winding down almost a third of its 58 businesses as it seeks to exit less profitable markets and increase its capital reserves, which have been lowered by the European sovereign debt crisis.
Chairman John McFarlane, who took the role in July, has overseen the departure of Chief Executive Officer Andrew Moss, who quit after a row over compensation, and is implementing a strategic review to bolster the insurer’s reserves and focus on its biggest markets such as the U.K.
Aviva acquired most of its U.S. operations through the $2.9 billion purchase of Des Moines, Iowa-based AmerUs Group Co. in 2006. It was the company’s largest acquisition and aimed to tap the growing U.S. baby boomer retirement market and position the firm away from slower growth in Europe.
The purchase of AmerUs, the third-biggest fixed annuity provider in the U.S. according to data compiled by Bloomberg, failed to produce Aviva’s desired returns because of the amount of capital needed to support the business.
In August, Aviva said it wrote down the value of its U.S. arm by 876 million pounds ($1.4 billion).
European Solvency II regulations, which are yet to be finalized, will force Europe-based insurers to hold more capital against their U.S. units, reduce returns and make them uncompetitive against local rivals, according to Tidjane Thiam, CEO of Prudential Plc, the U.K.’s biggest insurer.
Apollo, the private-equity firm run by Leon Black, entered the business in 2009 through the creation of its Athene Holding Ltd. affiliate, and expanded the following year through the $628 million purchase of Royal Bank of Canada’s U.S. life insurance unit. Athene in July agreed to buy Presidential Life Corp. for about $415 million.
Guggenheim also started in 2009 through an acquisition, and has since agreed to buy life-insurance units of FBL Financial Group Inc. and Industrial Alliance Insurance and Financial Services Inc. Guggenheim is a money manager based in Chicago and New York.
Harbinger, the hedge fund manager run by Philip Falcone, entered the business by buying Old Mutual Plc (OML)’s U.S. unit for $350 million in 2011.
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