Apollo Global Management LLC (APO) is in the lead to buy Aviva Plc (AV/)’s U.S. life insurance and annuities unit, positioning the buyout firm to beat Philip Falcone’s Harbinger Group Inc. (HRG), said people with knowledge of the matter.
Apollo is pursuing a joint bid with Guggenheim Partners LLC, said one of the people, who asked not to be named because the negotiations are private. A sale would occur at a “substantial discount” to the unit’s book value, excluding debt, of 2.4 billion pounds ($3.8 billion), Aviva Chief Financial Officer Pat Regan said last week.
Apollo, the private-equity firm run by Leon Black, last month boosted capital at its Athene Holding Ltd. annuity business by contributing assets valued at more than $800 million from a publicly traded fund it manages. That deal will allow Athene to buy more annuity assets “in the near to medium term,” and eventually achieve the scale to issue shares to the public, according to a presentation for the fund’s investors.
The Apollo-Aviva deal isn’t completed and may still collapse. Representatives at Aviva, Apollo, Guggenheim and Harbinger declined to comment.
Annuities are contracts, often issued by life-insurance companies, that offer guaranteed income for retirees. Apollo created Athene in 2009 and expanded in 2011 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. (PLFE) for about $415 million.
Aviva, the U.K.’s second-biggest insurer by market value, is selling or winding down almost a third of its 58 businesses, striving to get out of less profitable markets and boost capital reserves reduced by the European sovereign-debt crisis. Aviva acquired most of its U.S. operations through the $2.9 billion purchase of Des Moines, Iowa-based AmerUs Group Co. in 2006.
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