Vesta Insurance Group Inc. announced Friday that it has a definitive agreement to sell its life insurance operation, American Founders Life, for about $58 million in cash, and it said that correcting recently discovered accounting errors would trim shareholder equity by $11.6 million.
The deal with a U.S. subsidiary of Sagicor Financial Corp., a Barbados financial services group, is expected to close in the third quarter and is estimated to yield a statutory gain of about $23 million for Vesta Fire Insurance Corp., the Birmingham, Ala., parent's primary property/casualty subsidiary. The sale also is expected to support Vesta's intention to focus on homeowners insurance, it said.
Sagicor Life Inc. is A-rated by A.M. Best. Sagent Advisors Inc. acted as financial adviser to Vesta in connection with the deal.
Vesta separately revised upward an estimate of accounting errors' effect on shareholders' equity. Last Nov. 15 it reported the cumulative impact of an error known then would be a $1.8 million reduction in shareholders' equity measured by generally accepted accounting principles. In pinpointing the period and nature of this error, Vesta discovered additional errors, whose correction it now expects to reduce shareholders' equity by $11.6 million overall.
Vesta also announced that it has closed the sale of two million of its shares in Affirmative Insurance Holdings Inc. for $14 per share to Affirmative Insurance. Vesta said it intends to use the proceeds to enhance its financial flexibility and repay $21 million of its line of credit facility, reducing the credit line's total availability to $9 million. Vesta now owns about 35% of Affirmative.
