Aviva U.S. unit fetches $800 mln more than expected

The disposal is part of a company-wide revamp since a shareholder rebellion in 2012 which lead to the exit of its then chief executive following years of spiralling costs and disappointing share price performance.

Aviva said it had completed the sale of its U.S. life and annuities unit Aviva USA Corp to Athene Holding Ltd, putting its proceeds at $2.6 billion compared with the $1.8 billion price announced in December.

The additional $800 million “represented estimated earnings and other improvements in (the) statutory surplus” between June 30, 2012 to Sept. 30, 2013, the company said.

The insurer had in December 2012 announced the deal to sell its U.S. operations to Athene Holding, a retirement savings provider funded by an affiliate of Apollo Global Management, a specialist investor in alternative assets such as private equity.

However, regulators were concerned about an emerging trend of private equity firms entering the annuity business, because their shorter-term business model than traditional insurers may not work in the interests of policyholders.

In August, Apollo Global Management agreed to enhanced safeguards for policyholders with New York’s financial regulator as part of Athene’s planned purchase of the New York subsidiary of Aviva USA. (Full Story)

The new policyholder protections include higher capital standards, greater disclosure and enhanced regulatory scrutiny.

“The sale of the US business … simplifies the business, strengthens the capital position and is a step towards our goal of creating a business focused on cash flow and growth,” Aviva Chief Executive Mark Wilson said.

Aviva’s reorganisation, which promises savings from the sale or closure of more than a dozen units across its insurance and asset management operations around the world was first set in motion by Chairman John McFarlane.

The company brought in Wilson, former boss of Asian rival AIA Group at the start of 2013.

Chris Vellacott and Karen Rebelo are reporters for Reuters News in London