This article originally appeared in AdvisorOne's sister publication, LifeHealthPro.com
After months of speculation, Aviva PLC has found a buyer for its U.S. subsidiary. On Friday morning, Athene Holding Ltd., a life insurance holding company that focuses primarily on fixed and equity indexed annuities, agreed to acquire Aviva USA Corp. for $1.8 billion.
According to a company release, the deal will boost Aviva's pro forma economic capital surplus coverage ratio by 17 percentage points. The sale will reduce the group's credit risk exposure by approximately 25%, and also reduce the sensitivity of the group's economic capital results to credit spread movements by approximately 30%. Those numbers are significant as foreign-based insurers are facing tougher capital reserving requirements.
Aviva will receive $1.55 billion in cash, after the repayment of external debt, which will be used for general corporate purposes. The deal values Aviva USA at 7.9 times 2011 U.S. GAAP earnings and 0.6 times U.S. Statutory Capital as of the end of June. Included in the deal are Aviva's U.S. life and annuities business and related asset management operations.
