London-based Aviva PLC Aquires Iowa’s AmerUs for $2.9 Billion

July 14, 2006

Aviva PLC, Britain’s largest insurance company, said Thursday it will take over U.S. life insurance company AmerUs Group Co. in a $2.9 billion deal that will expand the U.K. insurer’s reach into the U.S. market.

London-based Aviva will pay $69 in cash per AmerUs share, a 10 percent premium to the closing price of July 6, the day before Aviva confirmed they were in talks. Shares of AmerUs rose 37 cents to $66.87 in morning trading on the New York Stock Exchange. AmerUs is the parent company of Indianapolis Life Insurance Co.

The British company has long said it wants to expand in the United States, and the companies were linked earlier this year.

Aviva’s United States operation is based in Boston, where it has about 390 employees.

Des Moines-based AmerUs has 1,190 workers, with about 600 based in Des Moines. Other offices are located in Topeka, Kan., Indianapolis and Woodbury, N.Y.

Aviva has formed teams to determine how to best merge the operations together, said Martin Ketelaar, AmerUs vice president for investor relations.

The company expects to save $45 million a year, he said.

Ketelaar said that right now we’re in the process of forming integration teams to determine best practices and that he there will probably be some type of impact at every location that we have.

Aviva wants AmerUs to serve as its platform in the United States for growth and significant expansion in the business is anticipated, he added.

Aviva said the purchase, which has been recommended by the Iowa-based company’s board, will “transform” its U.S. business and gives it a top position in the world’s largest savings market. The deal is subject to AmerUs shareholder approval.

“In a single move, the combination of AmerUs’ national distribution networks and the resources and expertise of Aviva, provides the platform for significant profitable growth in the U.S.,” Richard Harvey, Aviva’s group chief executive, said in a statement.

Aviva will combine AmerUs with its Aviva U.S. unit, and the business will use the Aviva name. Tom Godlasky, AmerUs’ chief executive, will head the U.S. operation.

Documents filed with the Securities and Exchange Commission indicate Gregory Boal will remain as AmerUs’ chief investment officer, Brian Clark will remain as chief product officer, Mark Heitz as executive vice president of annuities and Gary McPhail, executive vice president for life insurance.

AmerUs has about $25 billion in assets, Ketelaar said, compared with Aviva’s U.S. holdings of about $6 billion.

Aviva said it will raise 900 million pounds ($1.7 billion) in new shares at 700 pence ($12.90) each to finance the cash purchase, with the remainder to be paid with debt and money it has on hand.

Aviva said it anticipates the acquisition will contribute $45 million in annual pre-tax cost savings. The transaction is expected to be completed in the fourth quarter.

Earlier this year, Aviva withdrew a 17 billion pounds ($30 billion) proposal to buy smaller rival Prudential PLC after its approach was rebuffed. However, it added at the time that it intended to remain on the acquisition trail to consolidate its position as Britain’s largest insurance company.

Aviva shares fell 0.8 percent to 707 pence ($13.02) on the London Stock Exchange.

“We believe this to be a good deal for Aviva, increasing the group’s exposure to the huge U.S. market, whilst the business is of a size that integration should not be too difficult,” Numis Securities said.

AmerUs is the largest provider by sales of indexed life insurance products in the United States, and one of the country’s top five providers of indexed annuities.

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