UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Rule 14a-12

AMERUS GROUP CO.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)		Title of each class of securities to which transaction applies:
		Common Stock, no par value, of AmerUs Group Co. (“Company common stock”)
(2)		Aggregate number of securities to which transaction applies:
		46,214,325 shares of Company common stock (includes 3,155,330 shares of Company common stock reserved for issuance upon exercise or payment of outstanding stock options, stock units or other awards).
(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was calculated by multiplying ..000107 by the sum of: (a) the product of 43,058,995 shares of Company common stock and the per share amount of $69.00 in cash per share of Company common stock, (b) the product of 2,806,270 shares of Company common stock underlying options and $33.33 (the difference between $69.00 and $35.67, the weighted average exercise price per share of Company common stock underlying the options), (c) the product of 486,439 stock units, performance units and similar awards and $69.00 and (d) the product of 56,037 outstanding stock appreciation rights and $29.76 (the difference between $69.00 and $39.24, the weighted average of the fair market value of the outstanding stock appreciation rights on their respective dates of grant).

(4)		Proposed maximum aggregate value of transaction:
		$3,099,835,586
(5)		Total fee paid:
		$331,683
þ		Fee paid previously with preliminary materials.
þ		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)		Amount Previously Paid:
		$331,663
(2)		Form, Schedule or Registration Statement No.:
		Proxy Statement on Schedule 14A
(3)		Filing Party:
		AmerUs Group Co.
(4)		Date Filed:
		August 11, 2006

 

September 13, 2006

 

Dear Shareholder:

 

You are cordially invited to attend a special meeting of shareholders of the Company to be held on October 19, 2006, at 9:00 a.m., Des Moines local time, at the AmerUs Conference Center, Hub Tower, 3rd Floor, 699 Walnut Street, Des Moines, Iowa.

 

At the special meeting, you will be asked to approve an agreement and plan of merger that the Company entered into on July 12, 2006, providing for the merger of an indirect wholly owned subsidiary of Aviva plc with and into the Company. Aviva is the world’s fifth-largest insurance group and is one of the leading providers of life and pension products in Europe. If the merger is completed, the Company’s shareholders will receive $69.00 in cash for each share of Company common stock they own, and the Company will become 100% owned by Aviva. The $69.00 per share being paid in the merger represents a premium of approximately 20% over the average closing price of the Company’s shares for the 30-day trading period prior to the announcement of the merger.

 

The Company cannot complete the merger unless the conditions to closing are satisfied, including obtaining the approval of the Company’s common shareholders and the receipt of specified government and regulatory approvals. The Company currently expects that these government and regulatory approvals will be obtained and that the closing of the merger will occur before December 31, 2006.

 

The Company’s board of directors has determined that the merger agreement and the merger are fair to and in the best interests of the Company and its shareholders, and has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The Company’s board of directors unanimously recommends that the Company’s common shareholders vote “FOR” the proposal to approve the merger agreement.

 

The attached notice of special meeting and proxy statement explain the proposed merger and provide specific information concerning the special meeting. Please read these materials (including the annexes) carefully.

 

Your vote is important. Whether or not you plan to attend the special meeting, you should read the proxy statement and follow the instructions on your proxy card to vote by mail, telephone or Internet to ensure that your shares will be represented at the special meeting. If you attend the special meeting and wish to vote in person, you may revoke your proxy and do so.

 

Sincerely,

 

Thomas C. Godlasky

Chairman, President and
Chief Executive Officer

 

This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the fairness or merits of this transaction or the accuracy or adequacy of the information contained in this proxy statement. Any representation to the contrary is unlawful.

 

This proxy statement is dated September 13, 2006, and is first being mailed, along with the attached proxy card, to shareholders of the Company on or about September 18, 2006.

 

 

Dear AmerUs Group shareholder:

 

If any or all of the shares of AmerUs Group Co. common stock you own were received as a result of the demutualization (what demutualization means is on reverse side) of American Mutual Holding Company or Indianapolis Life Insurance Company, please note this special information:

 

The information contained in this mailing and the proposal described and recommended by AmerUs Groups’ board of directors for your approval do not and will not affect any insurance policy or annuity contract you may own with AmerUs Life Insurance Company or Indianapolis Life Insurance Company.

 

As always, your policy premiums, benefits, values and guarantees will continue to be governed by the terms of your policy.

 

What the enclosed mailing is about

 

As you may be aware, on July 13, 2006, AmerUs Group announced it had signed a definitive agreement to be acquired by Aviva plc, the world’s fifth largest insurance group. Subject to shareholder and regulatory approvals, Aviva will buy AmerUs Group for $69.00 in cash for each share of AmerUs Group stock you own.

 

What your board of directors recommends

 

As a shareholder of AmerUs Group, you are being asked to vote on the proposed acquisition. Please read the proxy statement accompanying this letter for more information on the transaction. AmerUs Group’s board of directors unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. AmerUs Group’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement on the enclosed proxy card.

 

If you have questions

 

Any policy or annuity contract you may own with one of AmerUs Group’s companies is not affected by this proposed transaction; if you have questions about your policy or contract, the phone numbers for customer service are provided below for your convenience.

 

If you have questions about the enclosed proxy material, please call the AmerUs Group Proxy Call Center, Monday through Friday between 9:00 a.m. eastern time and 10:00 p.m. eastern time, toll-free, at 1-866-821-2570.

 

Sincerely,

 

Thomas C. Godlasky
Chairman, President and Chief Executive Officer

 

To talk with a customer service representative about your policy or contract please call:

 

 

(see reverse side for additional information)

 

A review of demutualization

 

If you received any or all of your shares of AmerUs Group Co. stock as a result of the demutualization of American Mutual Holding Company or Indianapolis Life Insurance Company, key information follows.

 

Demutualization simply means the company converted from a mutual company to a stock company. When the company converted to a stock company, you received shares of AmerUs Group stock in exchange for membership interests (primarily the right to vote for the company’s directors).

 

The demutualization — the conversion to a stock company — did not affect the contract rights of your insurance policy or annuity contract from AmerUs Life Insurance Company (including its predecessor companies American Mutual Life Insurance Company, Central Life Assurance Company and Interstate Assurance Company) or Indianapolis Life Insurance Company. Your policy or contract status reflects only changes that the owner(s) of the policy may have made.

 

The transaction described in this proxy statement also does not affect the contract rights of any insurance policy or annuity contract you may own with any of AmerUs Group’s companies.

 

If you have any questions about your policy or annuity contract, please contact a customer service representative. The phone numbers for customer service are provided at the bottom on the front side of this letter.

 

699 Walnut Street

Des Moines, Iowa 50309-3948

 

NOTICE OF SPECIAL MEETING

OF SHAREHOLDERS

To Be Held on October 19, 2006

To the Shareholders:

 

A special meeting of shareholders of AmerUs Group Co. will be held on October 19, 2006, at 9:00 a.m., Des Moines local time, at the AmerUs Conference Center, Hub Tower, 3rd Floor, 699 Walnut Street, Des Moines, Iowa, for the following purposes:

 

1. to consider and vote on the proposal to approve the Agreement and Plan of Merger, dated as of July 12, 2006, by and among Aviva plc, Libra Acquisition Corporation and AmerUs Group Co.; and

 

2. to transact any other business as may properly come before the special meeting or at any adjournment or postponement of the special meeting.

 

The board of directors has fixed the close of business on September 8, 2006, as the record date for the determination of shareholders entitled to notice of and to vote at the special meeting. Accordingly, only shareholders of record on that date are entitled to vote at the special meeting or any adjournments thereof.

 

The Company’s board of directors has determined that the merger agreement and the merger are fair to and in the best interests of the Company and its shareholders, and has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The Company’s board of directors unanimously recommends that the Company’s common shareholders vote “FOR” the proposal to approve the merger agreement.

 

YOUR VOTE IS IMPORTANT

 

All shareholders are invited to attend the special meeting in person. Whether or not you plan to attend the special meeting, you should read the proxy statement and follow the instructions on your proxy card to vote by mail, telephone or Internet to ensure that your shares will be represented at the special meeting. If you attend the special meeting and wish to vote in person, you may revoke your proxy and do so.

 

By Order of the Board of Directors,

 

James A. Smallenberger

Senior Vice President and Secretary

 

Des Moines, Iowa

September 13, 2006

 

The following are some questions that you may have regarding the proposed merger and the other matters being considered at the special meeting and brief answers to those questions. The Company urges you to carefully read the remainder of this proxy statement because the information in this section does not provide all the information that might be important to you with respect to the proposed merger. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this proxy statement. Unless stated otherwise, all references in this proxy statement to the Company are to AmerUs Group Co., an Iowa corporation, all references to Aviva are to Aviva plc, a public limited company organized under the laws of England and Wales, all references to Merger Sub are to Libra Acquisition Corporation, an Iowa corporation and an indirect wholly owned subsidiary of Aviva, and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of July 12, 2006, by and among the Company, Aviva and Merger Sub, a copy of which is attached as Annex A to this proxy statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17 State Street — 10th Floor
New York, New York 10004
Banks and Brokers Call 212-440-9800
All others call Toll-Free 1-866-821-2570

 

699 Walnut Street

Des Moines, Iowa 50309-3948

 

This summary term sheet highlights material information contained in this proxy statement, but does not contain all of the information in this proxy statement that is important to your voting decision. To understand the merger agreement fully and for a more complete description of the terms of the merger, you should carefully read this entire proxy statement, including the attached annexes. In addition, the Company encourages you to read the information incorporated by reference into this proxy statement, which includes important business and financial information about the Company that has been filed with the Securities and Exchange Commission, which is referred to as the SEC. See “Where You Can Find More Information.”

 

Page references are included in parentheses to direct you to more complete descriptions of the topics presented in this summary term sheet. The merger agreement is attached as Annex A to this proxy statement. You are encouraged to read the merger agreement, because it is the legal document that contains the terms and conditions of the merger.

 

AmerUs Group Co.

 

699 Walnut Street

Des Moines, Iowa 50309-3948

Tel: 515-362-3600

 

AmerUs is an Iowa corporation located in Des Moines, Iowa, engaged through its subsidiaries in the business of marketing, underwriting and distributing individual life insurance and annuity products in 50 states, the District of Columbia and the U.S. Virgin Islands. Its major operating subsidiaries include AmerUs Life Insurance Company, American Investors Life Insurance Company, Inc., Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York.

 

Aviva plc

 

St Helen’s

1 Undershaft

London EC3P 3DQ

United Kingdom

Tel: +44 0 207 283 2000

 

Aviva plc, a public limited company organized under the laws of England and Wales, is the world’s fifth-largest insurance group and the United Kingdom’s largest insurance services provider (based on gross worldwide premiums at December 31, 2005), and is one of the leading providers of life and pension products in Europe, with substantial positions in other markets around the world. Aviva’s principal business activities are life insurance and long-term savings, investment management and property and casualty insurance.

 

Libra Acquisition Corporation

 

c/o Aviva USA Corporation

108 Myrtle Street

North Quincy, Massachusetts 02171-1753

Tel: 617-405-6245

Libra Acquisition Corporation, an Iowa corporation, is an indirect wholly owned subsidiary of Aviva formed for the sole purpose of effecting the merger. Libra Acquisition Corporation has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

Special Meeting of the Company’s Shareholders (page 10)

 

Date, Time and Place.  A special meeting of shareholders of the Company will be held on October 19, 2006, at 9:00 a.m., Des Moines local time, at the AmerUs Conference Center, Hub Tower, 3rd Floor, 699 Walnut Street, Des Moines, Iowa, for the following purposes:

 

 

Record Date and Shares Entitled to Vote.  Only holders of record of shares of Company common stock at the close of business on September 8, 2006, the record date for the special meeting, are entitled to vote at the special meeting. Each record holder will have one vote at the special meeting for each share of Company common stock as of the close of business on the record date. On the record date, 43,055,922 shares of Company common stock were issued and outstanding and held by approximately 93,942 holders of record.

 

Required Vote.  Under the IBCA, in order for the merger agreement to be approved, the votes cast favoring the merger agreement must exceed the votes cast opposing the merger agreement at a meeting of the Company’s common shareholders, provided that a quorum is present. A quorum exists if at least a majority of the votes entitled to be cast at the meeting are present in person or by proxy. While abstentions will be treated as present at the meeting for purposes of determining the presence of a quorum, they will not be counted as votes cast on the proposal to approve the merger agreement, and a decision by a shareholder to abstain will have no effect in determining whether the merger agreement is approved. The failure of a shareholder to vote or abstain could have a negative effect on the ability of the Company to obtain a quorum at the meeting in accordance with the IBCA, but assuming that the required quorum is present at the meeting, such failure will have no effect in determining whether the merger agreement is approved.

 

Brokers, banks or other nominees who hold shares of Company common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares, which are referred to as “broker non-votes,” will be treated as present at the meeting for purposes of determining the presence of a quorum but will have no effect in determining whether the merger agreement is approved. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to approve the merger agreement.

 

Voting by the Company’s Directors and Executive Officers.  On the record date for the special meeting, the directors and executive officers of the Company and their affiliates beneficially owned and were entitled to vote 363,613 outstanding shares of Company common stock, representing less than 1% of the shares of Company common stock outstanding on that date.

 

Voting of Certain Shares Held by the Company (page 11)

 

The Company holds 32,355 shares of Company common stock in connection with its supplemental executive retirement plan and excess benefit plan and is entitled to vote these shares. The Company intends to vote all of these shares in favor of the proposal to approve the merger agreement.

 

The principal purposes of the merger are to enable Aviva to acquire all of the outstanding shares of Company common stock and to provide the Company’s common shareholders with the opportunity to receive a cash payment for their shares at a premium over the market prices at which Company common stock traded before the public

announcement of the merger agreement. If the merger is completed, each share of Company common stock will be converted into the right to receive $69.00 in cash.

 

Following completion of the merger, the Company will become an indirect wholly owned subsidiary of Aviva and Company common stock will be delisted from the New York Stock Exchange, or NYSE, will no longer be publicly traded and will be deregistered under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

If the merger is not completed for any reason, the Company’s common shareholders and holders of stock options and other awards will not receive the merger consideration. Instead, the Company will remain a public company and shares of Company common stock will continue to be listed on the NYSE. If the merger is not completed, the Company expects to continue to conduct its business in a manner similar to the manner in which it is presently conducted. In such event, the value of shares of Company common stock would continue to be subject to current risks and opportunities, including the various factors described in the Company’s past filings with the SEC, such as the condition of the insurance industry and prevailing economic and market conditions.

 

If the merger is not completed, Company common stock may trade at pre-announcement levels or below due to adverse market reaction. If the merger is not completed, there can be no assurance that any other transaction similar to the merger would be available to the Company. Even if such a transaction were available, there can be no assurance that such transaction would be acceptable to the Company’s board of directors and would offer the Company’s common shareholders the opportunity to receive a cash payment for their shares of Company common stock at a premium over the market prices at which Company common stock traded before the public announcement of any such transaction.

 

If the merger is completed, each outstanding share of Company common stock will be converted into the right to receive $69.00 in cash. You will receive the per share amount of $69.00 in cash in respect of your shares of Company common stock after you remit your stock certificate(s) evidencing your shares of Company common stock in accordance with the instructions contained in a letter of transmittal to be sent to you as soon as reasonably practicable after completion of the merger, together with a properly completed and signed letter of transmittal and any other documentation required to be completed pursuant to the written instructions.

 

If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements.

 

If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

Each outstanding option to purchase shares of Company common stock, whether vested or unvested, will be converted into the right to receive an amount in cash per share subject to the option equal to the excess, if any, of the per share amount of $69.00 in cash over the exercise price of such option, less any required withholding taxes.

 

Each outstanding stock unit, performance unit or similar award, whether vested or unvested, will be converted into the right to receive an amount of cash per unit or award equal to the per share amount of $69.00 in cash, less any required withholding taxes.

 

Each outstanding SAR, whether vested or unvested, will be converted into the right to receive an amount of cash per stock unit to which the SAR relates equal to the product of (1) the total number of unexercised stock units to which the SAR relates multiplied by (2) the excess of the per share amount of $69.00 in cash over the fair market value of a share of Company common stock on the SAR’s date of grant, less any required withholding taxes.

 

The Company’s board of directors has determined that the merger agreement and the merger are fair to and in the best interests of the Company and its shareholders, and has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The Company’s board of directors unanimously recommends that the Company’s common shareholders vote “FOR” the proposal to approve the merger agreement.

 

Goldman, Sachs & Co., or Goldman Sachs, acted as the Company’s financial advisor in connection with the merger. On July 12, 2006, Goldman Sachs delivered its oral opinion to the board of directors, which was subsequently confirmed by delivery of a written opinion, dated as of July 12, 2006, that, as of that date and based upon and subject to the factors and assumptions set forth in the written opinion, the $69.00 per share in cash to be received by the holders of the outstanding shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders. Goldman Sachs subsequently confirmed its earlier opinion by delivery of its written opinion dated as of September 11, 2006.

 

The full text of the written opinion of Goldman Sachs, dated as of September 11, 2006, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Goldman Sachs in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Company common stock should vote with respect to the merger.

 

A copy of the merger agreement is attached to this proxy statement as Annex A and a summary of the merger agreement is provided beginning on page 43 of this proxy statement. You are encouraged to carefully read the merger agreement as it is the legal document that contains the terms and conditions of the merger.

 

The merger agreement contains restrictions on the Company’s ability to solicit or engage in discussions or negotiations with a third party regarding a takeover proposal as described in “The Merger Agreement — Covenants and Agreements.” Notwithstanding these restrictions, under certain limited circumstances, the Company may respond to and negotiate an unsolicited acquisition proposal or terminate the merger agreement and enter into an acquisition agreement with respect to a superior proposal, subject to paying Aviva a termination fee of $90,000,000 and reimbursing up to $12,500,000 of Aviva’s out-of-pocket merger-related expenses.

 

The respective obligations of each of the parties to complete the merger are subject to the satisfaction or waiver of a number of conditions, including the following:

 

 

 

 

The obligation of Aviva and Merger Sub to complete the merger is also subject to the satisfaction or waiver of a number of conditions, including the following:

 

 

 

The Company’s obligation to complete the merger is also subject to the satisfaction or waiver of a number of conditions, including the following:

 

 

The statutory waiting period under the HSR Act expired at 11:59 p.m. on September 6, 2006. The Company can give no assurance that all of the remaining conditions to the merger will be either satisfied or waived.

 

The merger agreement may be terminated under certain circumstances, including the following:

 

 

 

 

 

The Company has agreed to pay Aviva a termination fee of $90,000,000 and to reimburse Aviva for up to $12,500,000 of its out-of-pocket fees and expenses incurred in connection with the merger in the event that the merger agreement is terminated under the following circumstances, such payment to occur on the business day following termination in the case of the second and third bullets below, or entry into or completion of a third-party acquisition proposal in the case of the first and fourth bullets below:

 

 

When considering the recommendation by the Company’s board of directors, you should be aware that a number of the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the Company’s other shareholders. The Company’s board of directors was aware of these interests and considered them, among other matters, in unanimously adopting and approving the merger agreement and the transactions contemplated by the merger agreement.

 

Such interests relate to, or arise from, among other things, (1) the fact that one of the Company’s executive officers has a supplemental benefit agreement with the Company that provides for certain benefits upon termination of employment following a change of control; (2) the fact that eight of the Company’s executive officers have entered into employment agreements with the Company at the request of Aviva that will become effective upon completion of the merger and will replace their supplemental benefit agreements; (3) the fact that unvested stock options, stock units, performance units and similar awards will vest in connection with the merger; (4) the fact that, with respect to pre-merger acts, omissions, facts or events, the surviving corporation will continue to (a) provide indemnification and advancement of expenses of former or present directors and officers and (b) for a period of six years after the effective time of the merger, maintain directors’ and officers’ liability insurance policies on terms no less favorable in the aggregate than those presently provided or maintained by the Company, subject to certain limitations; and (5) the fact that, during the 24-month period following the merger, Aviva has agreed to provide employees of the Company who continue their employment with the surviving corporation after the effective time of the merger with compensation and benefits that are not less favorable in the aggregate than those currently provided by the Company.

 

All these additional interests are described in this proxy statement, to the extent material, and, except as described in the proxy statement, such persons have, to the knowledge of the Company, no material interest in the merger apart from those of the Company’s common shareholders generally. Please see “The Merger — Interests of the Company’s Directors and Executive Officers in the Merger.”

 

Aviva has represented in the merger agreement that it has or will have available, prior to the effective time of the merger, sufficient cash in immediately available funds to pay or to cause Merger Sub to pay the merger consideration to the Company’s common shareholders and to complete the merger and the transactions contemplated by the merger agreement. The receipt of financing by Aviva is not a condition to the obligations of either party to complete the merger under the terms of the merger agreement.

 

Shares of Company common stock are listed on the NYSE. For a description of the market price and the payment of dividends, please see “Market Price Data and Dividend Information.”

 

This proxy statement contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar and related expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future events. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors: (1) the shareholders of the Company may not approve the merger agreement and the transactions contemplated by the merger agreement at the special meeting; (2) the parties may be unable to obtain governmental and regulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; (3) the parties may be unable to complete the merger because, among other reasons, conditions to the closing of the merger may not be satisfied or waived; or (4) other factors that may be referred to in the Company’s reports filed with or furnished to the SEC from time to time. There can be no assurance that other factors not currently anticipated by the Company will not materially and adversely affect future events. Security holders are cautioned not to place undue reliance on any forward-looking statements made by the Company or on its behalf. Forward-looking statements speak only as of the date the statement was made. The Company undertakes no obligation to update or revise any forward-looking statement.

 

Company common stock is listed and traded on the NYSE under the symbol “AMH.” The following table sets forth, for the periods indicated, the high and low per share price of Company common stock as quoted on the NYSE and the dividends per share declared during such period:

 

 

 

 

The following table sets forth the closing sale price per share of Company common stock as quoted on the NYSE on June 23, 2006, the last trading day before the Company received Aviva’s $69.00 per share verbal proposal, July 6, 2006, the last trading day before the public announcement of discussions between the Company and Aviva regarding the merger and September 12, 2006, the latest practicable trading day before the date of this proxy statement:

 

 

If the merger is completed, Company common stock will be delisted from the NYSE and Company common stock will be deregistered under the Exchange Act.

 

The Company is furnishing this proxy statement to holders of Company common stock as part of the solicitation of proxies by the Company’s board of directors for use at the special meeting of shareholders.

 

The Company will hold the special meeting on October 19, 2006, at 9:00 a.m., Des Moines local time, at the AmerUs Conference Center, Hub Tower, 3rd Floor, 699 Walnut Street, Des Moines, Iowa.

 

The special meeting will be held for the following purposes:

 

 

After careful consideration, the Company’s board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its shareholders. Accordingly, the Company’s board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement.

 

Only holders of record of shares of Company common stock at the close of business on September 8, 2006, the record date for the special meeting, are entitled to vote at the special meeting. Each record holder will have one vote at the special meeting for each share of Company common stock as of the close of business on the record date. On the record date, 43,055,922 shares of Company common stock were issued and outstanding and held by approximately 93,942 holders of record. A quorum exists if at least a majority of the votes entitled to be cast at the special meeting are present in person or by proxy. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed to solicit additional proxies.

 

Under the IBCA, in order for the merger agreement to be approved, the votes cast favoring the merger agreement must exceed the votes cast opposing the merger agreement at a meeting of the Company’s shareholders, provided that a quorum is present. A quorum exists if at least a majority of the votes entitled to be cast at the meeting are present in person or by proxy. While abstentions will be treated as present at the meeting for purposes of determining the presence of a quorum, they will not be counted as votes cast on the proposal to approve the merger agreement, and a decision by a shareholder to abstain will have no effect in determining whether the merger agreement is approved. The failure of a shareholder to vote or abstain could have a negative effect on the ability of the Company to obtain a quorum at the meeting in accordance with the IBCA, but assuming that the required quorum is present at the meeting, such failure will have no effect in determining whether the merger agreement is approved. Brokers, banks or other nominees who hold shares of Company common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. These non-voted shares, which are referred to as “broker non-votes,” will be treated as present at the meeting for purposes of determining the presence of a quorum but will have no effect in determining whether the merger agreement is approved.

 

On the record date, the directors and executive officers of the Company and their affiliates beneficially owned and were entitled to vote 363,613 outstanding shares of Company common stock, representing less than 1% of the shares of Company common stock outstanding on that date.

 

The Company holds 32,355 shares of Company common stock in connection with its supplemental executive retirement plan and excess benefit plan and is entitled to vote these shares. The Company intends to vote all of these shares in favor of the proposal to approve the merger agreement.

 

Shareholders may vote their shares by attending the special meeting and voting their shares of Company common stock in person, or by marking, signing and dating the enclosed proxy card and mailing it in the enclosed postage-prepaid envelope or by submitting the proxy by telephone or the Internet by following the instructions printed on the proxy card. Shareholders who hold such shares through a broker, bank or other nominee must follow the instructions on the proxy form supplied by their broker, bank or other nominee, which may provide for voting by telephone or via the Internet.

 

All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders of such shares. Properly executed proxies that do not contain voting instructions will be voted “FOR” the proposal to approve the merger agreement.

 

Shares of Company common stock represented at the special meeting but not voted, including broker non-votes, and shares of Company common stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence of a quorum for the transaction of all business.

 

Only shares affirmatively voted “FOR” the approval of the merger agreement and properly executed proxies that do not contain voting instructions will be counted as favorable votes for the proposal.

 

The Company does not expect that any matter other than those described in this proxy statement will come before the special meeting. If any other matters are properly brought before the special meeting for action, however, the Company intends that the persons named as proxies on the enclosed proxy card will vote in accordance with their best judgment. These matters may include an adjournment or postponement of the special meeting from time to time if the Company’s board of directors so determines, except that proxies that are voted against the merger proposal may not be voted by the persons named on the enclosed proxy card for an adjournment or postponement of the special meeting. If any adjournment or postponement is made, the Company may solicit additional proxies during the adjournment or postponement period.

 

Your vote is important. Please return your marked proxy card or submit your proxy by telephone or Internet so your shares can be represented, even if you plan to attend the special meeting in person.

 

The grant of a proxy on the enclosed proxy card or by telephone or Internet does not preclude a shareholder from voting in person at the special meeting. A shareholder may revoke a proxy at any time prior to its exercise by (1) filing a written notice with the Secretary of the Company or the acting Secretary of the special meeting stating that the shareholder would like to revoke his proxy, (2) submitting a duly executed proxy to the Secretary of the Company bearing a later date or (3) appearing at the special meeting and giving oral notice to the presiding officer during the special meeting. Attendance at the special meeting will not in and of itself constitute a revocation of the proxy. If you have instructed your broker, bank or other nominee to vote your shares, you must follow the procedures provided by your broker, bank or other nominee to change those instructions.

 

The Company and its proxy solicitation firm, Georgeson, may solicit proxies in person or by telephone, fax or other means. The Company will pay Georgeson a fee of $16,000, plus reasonable expenses, for its services. The

Company will also pay all other reasonable expenses for solicitation. In addition, proxies may be solicited by officers and directors and other employees of the Company, without additional remuneration, in person or by telephone, fax or other means.

 

You should send in your proxy by mail or vote by telephone or the Internet without delay. If you hold shares of Company common stock through a broker, bank or other nominee, please follow the instructions on the proxy form supplied by your broker, bank or other nominee, which may provide for voting by telephone or through the Internet. The Company will also reimburse brokers, banks and other nominees for their expenses in sending these materials to you and obtaining your voting instructions.

 

You should not send your stock certificate(s) evidencing your shares of Company common stock with your proxy. As soon as reasonably practicable after completion of the merger, a letter of transmittal with written instructions for the surrender of stock certificates will be mailed to holders of shares of Company common stock. If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

AmerUs is an Iowa corporation located in Des Moines, Iowa, engaged through its subsidiaries in the business of marketing, underwriting and distributing individual life insurance and annuity products in 50 states, the District of Columbia and the U.S. Virgin Islands. Its major operating subsidiaries include AmerUs Life Insurance Company, American Investors Life Insurance Company, Inc., Indianapolis Life Insurance Company and Bankers Life Insurance Company of New York.

 

AmerUs was founded in 1896 as the mutual insurer Central Life Assurance Company. In 1996, it became the first Mutual Insurance Holding Company in the United States, or MIHC, a structure that allows mutuals to access the public equity markets, which AmerUs did in 1997 with its initial public offering. In 2000, AmerUs reorganized its MIHC structure through a full demutualization and became a 100% public stock company. The Company’s principal executive offices are located at 699 Walnut Street, Des Moines, Iowa 50309-3948, and its telephone number is 515-362-3600.

 

Aviva plc, a public limited company organized under the laws of England and Wales, is the world’s fifth-largest insurance group and the United Kingdom’s largest insurance services provider (based on gross worldwide premiums at December 31, 2005), and is one of the leading providers of life and pension products in Europe, with substantial positions in other markets around the world. Aviva’s principal business activities are life insurance and long-term savings, investment management and property and casualty insurance.

 

Aviva was created following the merger of CGU and Norwich Union in May 2000. The group was called CGNU until rebranding as Aviva in July 2002. Aviva can trace its history back over three centuries. Aviva’s principal executive offices are located at St Helen’s, 1 Undershaft, London EC3P 3DQ, United Kingdom, and its telephone number is +44 0 207 283 2000.

 

Libra Acquisition Corporation, an Iowa corporation, is an indirect wholly owned subsidiary of Aviva formed for the sole purpose of effecting the merger. Libra Acquisition Corporation has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

 

Libra Acquisition Corporation’s principal executive offices are located at 108 Myrtle Street, North Quincy, Massachusetts 02171-1753, and its telephone number is 617-405-6245.

 

The following is a description of the material aspects of the merger. While the Company believes that the following description covers the material terms of the merger, the description may not contain all of the information that is important to you. The Company encourages you to carefully read this entire proxy statement, including the merger agreement attached to this proxy statement as Annex A, for a more complete understanding of the merger.

 

The board of directors regularly evaluates the Company’s strategic direction and ongoing business plans, with a view towards strengthening the Company’s core businesses and improving shareholder value. A focus of this evaluation has, for some time, been centered on the Company’s competitive position in the industry. Many of the Company’s competitors are better capitalized, have higher ratings and have significantly greater resources. As part of its ongoing evaluation of the Company, the board of directors has considered a variety of strategic alternatives. In that regard, representatives of the Company have from time to time discussed potential business relationships with representatives of various companies in the insurance industry that might expand the Company’s business, improve its competitive position and enhance shareholder value. During its investigations of these strategic alternatives, the policy of the Company has been neither to actively seek nor oppose the sale of the Company, but rather to act at all times in the best interests of the Company and its shareholders.

 

In the third quarter of 2004, a large U.S. life insurance company, referred to as Company A, approached the Company and expressed an interest in acquiring the Company. Following the execution of a confidentiality agreement and due diligence, discussions with Company A were terminated in October 2004, after the Company and Company A were unable to reach agreement as to the price to be paid for the shares of the Company. At the same time, discussions were held with three other North American life insurance companies with respect to a potential acquisition transaction, but none of these entities expressed interest in pursuing such a transaction.

 

In June 2005, Roger K. Brooks, then Chairman and Chief Executive Officer of the Company, and Thomas C. Godlasky, then President and Chief Operating Officer of the Company, attended a meeting of the Company’s insurance sales agents in London. While in London, Messrs. Brooks and Godlasky also arranged and attended a meeting with David Ball, Corporate Development Director of Aviva International Holdings Limited, an indirect wholly owned subsidiary of Aviva that is referred to as Aviva International, and Gavin Dixon, then M&A Director of Aviva, at which potential business relationships between the Company and Aviva were discussed.

 

In November 2005, Aviva indicated that it wished to further pursue its interest in a strategic transaction with the Company. Subsequently, Messrs. Brooks and Godlasky had discussions regarding such a transaction with Philip G. Scott, Group Executive Director of Aviva, Mark Dearsley, Finance Director of Aviva International, and Mr. Ball, including at an in-person meeting in Chicago. Aviva signed a confidentiality agreement with the Company on November 15, 2005, and thereafter Aviva was provided with selected information regarding the Company.

 

On December 29, 2005, Mr. Brooks retired from his positions as an officer and employee of the Company. Mr. Godlasky continued as President and became Chairman and Chief Executive Officer of the Company, concurrent with Mr. Brooks’ retirement.

 

In early January 2006, the discussions that had begun in November 2005 were terminated without Aviva having made a proposal to acquire the Company.

 

On May 3, 2006, Mr. Scott made a telephone call to Mr. Godlasky to inquire as to whether the Company would be interested in reopening discussions regarding a strategic transaction between the two companies, and suggesting that the two meet in Chicago to discuss the matter. Mr. Godlasky summarized his telephone conversation with Mr. Scott during regularly scheduled meetings of the board of directors held on May 4 and 5, 2006. After discussion, the board of directors authorized Mr. Godlasky to meet with Mr. Scott.

 

Messrs. Godlasky and Scott met in Chicago on May 18, 2006 to discuss recent business developments at their respective companies and to discuss Aviva’s interest in a possible strategic transaction with the Company. Mr. Scott indicated that Aviva expected to review its strategic planning options at meetings of its board of directors scheduled for the end of June, and that he was hopeful of reviving discussions between the two companies before that time.

Mr. Godlasky told Mr. Scott that he would discuss with the Company’s board of directors whether it was interested in pursuing discussions with Aviva. In addition, Mr. Godlasky indicated to Mr. Scott his belief that the board of directors would seek a price in the range of $70.00 per share of Company common stock.

 

The board of directors met telephonically on May 22, 2006, for the purpose of discussing the substance of Mr. Godlasky’s May 18, 2006 meeting with Mr. Scott. Representatives from Goldman Sachs and the Company’s special outside counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which is referred to as Skadden, also attended the meeting. Mr. Godlasky summarized his recent discussions with Mr. Scott and indicated he would not recommend entering into discussions with Aviva at the present time unless Aviva was willing to proceed on a timely basis. Following Mr. Godlasky’s presentation, the board of directors deliberated on the matter. The discussion included, among other things, the topics of price, confidentiality, timing, financing and the cross-border nature of the proposed transaction. After concluding its discussion, the board of directors authorized Mr. Godlasky to continue discussions with Aviva.

 

Mr. Scott and Mr. Godlasky spoke several times over the following week. The board of directors met telephonically on May 31, 2006 for the purpose of monitoring the progress of Mr. Godlasky’s discussions with Aviva. Also present at the meeting were representatives of Goldman Sachs and Skadden. At the meeting, Mr. Godlasky updated the board of directors on his discussions with Aviva. He relayed Aviva’s willingness to proceed with negotiations on a timely basis. Mr. Godlasky then outlined a proposed time schedule of negotiations with Aviva. Mr. Godlasky also described plans for opening an electronic data room on June 2, 2006, for use by Aviva and its representatives for the purpose of conducting due diligence, and noted that the electronic data room would contain (1) an actuarial appraisal of the insurance operations of the Company as of September 30, 2005 prepared by Milliman, Inc. and dated May 31, 2006, which is referred to as the Initial Milliman Report, (2) a memo from Milliman, Inc. dated June 1, 2006 which rolled forward the actuarial appraisal value of the insurance operations of the Company from September 30, 2005 to March 31, 2006, which is referred to as the Initial Milliman Memo, and (3) an internal memo and analysis prepared by the Company and dated June 1, 2006, which estimated the actuarial appraisal valuation for the insurance operations of the Company as of March 31, 2006, June 30, 2006 and September 30, 2006 in the aggregate and on a per share basis, net of holding company assets and liabilities, which is referred to as the Initial Company Memo. After discussion, the board of directors authorized Mr. Godlasky to release the Initial Milliman Report, the Initial Milliman Memo and the Initial Company Memo, open the electronic data room on June 2, 2006, and continue discussions with Aviva and its representatives.

 

On June 2, 2006, the electronic data room and the Initial Milliman Report, the Initial Milliman Memo and the Initial Company Memo were made available to Aviva. After review of the Initial Milliman Report, the Initial Milliman Memo and the Initial Company Memo, Aviva requested the opportunity to meet and discuss the contents of the documents with members of the senior management of the Company and representatives of Milliman, Inc. This meeting took place among representatives of the parties in Chicago on June 15, 2006. The meeting was attended by Mr. Godlasky, Brian J. Clark, Executive Vice President and Chief Product Officer of the Company, Christopher J. Littlefield, Executive Vice President and General Counsel of the Company, Denis Tauscheck, Vice President — Financial Forecasting of the Company, representatives from Milliman, Inc., Mr. Ball, Jim Webber, Director of Financial Management of Aviva International, and representatives of Aviva’s consultant, Tillinghast. At the meeting, the representatives from the Company and Milliman, Inc. answered questions from Aviva with respect to the Company’s actuarial valuation, litigation and other regulatory matters.

 

On June 16, 2006, Mr. Godlasky and Mr. Scott had a telephone conversation in which the two discussed a tentative timeline for the negotiations. Mr. Scott proposed that the two companies proceed with the goal of completing the negotiations (should they continue to a definitive agreement) and announcing a transaction by July 14, 2006. Mr. Godlasky summarized the substance of his telephone conversation with Mr. Scott in a telephonic meeting of the board of directors on June 16, 2006.

 

Following meetings of Aviva’s board of directors that took place on June 21 and 22, 2006, Mr. Scott called Mr. Godlasky on June 23, 2006 to indicate that he wished to meet with Mr. Godlasky in Chicago on June 26, 2006, and that he was authorized to proceed with respect to a possible transaction. However, Mr. Scott shared Aviva’s current views on pricing in light of the Company’s share price (then approximately $53.00 per share) and said that due to the general downward trend in the share prices for companies in the insurance industry since the end of April

2006, Aviva was prepared only to offer $66.00 per share of Company common stock. Mr. Scott also said Aviva would seek a 4% breakup fee and the termination of further dividends after execution of a definitive agreement.

 

Mr. Godlasky relayed the substance of his conversation with Mr. Scott to the Company’s board of directors in a meeting held on June 23, 2006. The meeting involved an extensive discussion of price and included advice from the Company’s financial advisor, Goldman Sachs. Based on their experience and knowledge of the Company, the board of directors believed that a price closer to $70.00 per share of Company common stock was more appropriate, and Goldman Sachs provided preliminary advice as to factors to be considered by the board of directors with respect to the per share consideration. Following the meeting of the board of directors, Mr. Godlasky informed Mr. Scott on June 24, 2006 that neither he nor the board of directors was prepared to proceed on the basis of the proposed price of $66.00; rather, it would be necessary for Aviva to improve its price. Mr. Scott took this under advisement and it was determined that the parties would proceed with the meeting scheduled in Chicago on June 26, 2006.

 

The meeting on June 26, 2006 in Chicago involved Messrs. Godlasky and Littlefield and Melinda S. Urion, Executive Vice President, Chief Financial Officer and Treasurer of the Company, together with Messrs. Scott and Ball, Graham Jones, Group Legal Services Director of Aviva, Clifford Abrahams, M&A Director of Aviva, and Andrew Moss, Group Finance Director of Aviva. A number of subjects were discussed at the meeting, including price, primary conditions for the transaction, additional due diligence to be completed and a request for a breakup fee in the event that a third party sought to pay a higher price for the Company. After a lengthy discussion, Mr. Scott agreed to increase Aviva’s per share offer to $69.00 per share and to consider a 3% breakup fee.

 

On June 27, 2006, the board of directors received a letter from Aviva confirming its interest in proceeding with a transaction, which was unanimously endorsed by Aviva’s board of directors. The letter was non-binding and subject to additional due diligence, site visits and the execution of a definitive agreement, but served to formally express Aviva’s continuing pursuit of a transaction. The key terms of the non-binding proposal were as follows:

 

 

On June 28, 2006, the board of directors convened a special telephonic meeting in order to receive an update with respect to a possible transaction with Aviva. Representatives from Goldman Sachs and Skadden were also in attendance at the meeting. Mr. Godlasky discussed with the board of directors his conversation with Mr. Scott on June 24, 2006 and the results of the meeting with Mr. Scott on June 26, 2006. Mr. Godlasky then reviewed the key terms of the non-binding proposal received from Aviva on June 27, 2006, focusing on the proposed per share price of $69.00 and the 3% break-up fee. Mr. Godlasky indicated that while Mr. Scott had discussed Aviva’s desire to retain Mr. Godlasky and members of the senior management team of the Company following the transaction, there had been no discussion of which members of senior management Aviva wished to retain or the specific details of any post-transaction management arrangements. Mr. Godlasky then summarized the due diligence proposed to be undertaken by Aviva in connection with the transaction. Following this review, representatives from Goldman Sachs presented their preliminary financial analysis of Aviva’s proposal. A representative from Skadden then reviewed the terms of the non-binding proposal with the board of directors from a legal perspective, and outlined the directors’ fiduciary duties with respect to the non-binding proposal. Upon hearing each of these presentations, the board of directors deliberated on the non-binding proposal and unanimously authorized Mr. Godlasky and the management of the Company to go forward and continue the process of negotiating a definitive agreement based on proposed per share price of $69.00 in cash.

Aviva initially distributed a draft of the merger agreement to the Company through its legal counsel, LeBoeuf, Lamb, Greene & MacRae LLP, on the evening of June 29, 2006, which was thereafter negotiated between representatives of the two companies through July 12, 2006.

 

After discussions with Mr. Godlasky, on July 3, 2006, Aviva sent proposed employment terms with respect to eight executives of the Company that Aviva desired to retain after completion of the proposed transaction. Drafts of employment agreements were later exchanged on July 8, 2006 and were thereafter negotiated through July 12, 2006.

 

Concurrently with the negotiation of the draft merger agreement, on July 5 and 6, 2006, members of the Company’s and Aviva’s senior management met in Chicago to conduct due diligence and attend meetings to discuss certain business, legal, regulatory, tax and other matters in connection with the proposed merger, and to discuss the major terms of the proposed transaction.

 

On the evening of July 6, 2006 (London time), the Financial Times, an international daily newspaper, contacted Aviva regarding its negotiations with the Company, on which Aviva declined to comment. The Financial Times later reported on its website that Aviva was engaged in discussions with the Company with respect to a potential acquisition of the Company. On July 7, 2006, Aviva issued the following press release in response to the Financial Times article:

 

Further to recent speculation, Aviva plc (“Aviva”) confirms it is in discussions with AmerUs Group Co. (“AmerUs”), which may or may not lead to the acquisition of AmerUs. A transaction, if agreed, is expected to be funded from a combination of Aviva’s internal resources, external debt and a market placing of Aviva shares. If a transaction is agreed, any equity placing will be accompanied by an update on Aviva’s current trading. These discussions are consistent with Aviva’s stated strategy of pursuing value creating acquisition opportunities in key growth segments of the major global long term savings markets.

 

Later on July 6, 2006, the Company’s board of directors convened a special telephonic meeting to discuss this development. Representatives from Goldman Sachs and Skadden were also present at the telephonic meeting. During the meeting, the board of directors reviewed the article and also the proposed press release to be issued by the Company in response to the Financial Times article. Following the meeting, the Company issued a press release, dated July 7, 2006, which stated as follows:

 

AmerUs Group Co. (NYSE:AMH), a leading producer of life insurance and annuity products, confirmed today that it is engaged in discussions with Aviva plc regarding a potential acquisition of the company by Aviva. The Company said that there can be no assurance that these discussions will result in any transaction. The Company said that it does not intend to comment or provide updates on the discussions until they are concluded.

 

On July 7, 2006, the board of directors had a telephonic meeting in order to receive an update on the status of the merger agreement discussions. Mr. Godlasky briefly reviewed recent developments with the board of directors, including the Financial Times article and the press releases issued earlier that day by the Company and Aviva, the Company’s stock price and trading volume prior to the meeting, and the visit to the corporate offices of the Company by Messrs. Scott and Dearsley, which had occurred earlier that day. Following Mr. Godlasky’s presentation, representatives from Goldman Sachs presented their further preliminary financial analysis of the transaction to the board of directors. A representative from Skadden then reported on the structure, terms and conditions of the draft merger agreement, and discussed the directors’ fiduciary duties with respect to the transaction. A representative from Skadden also provided an overview of the post-merger employee benefits and discussed the change-of-control benefits that certain executive officers would be entitled to under their existing change-of-control agreements if they chose to terminate their own employment immediately after the closing of the proposed merger, and Aviva’s request to have eight of those change-of-control agreements replaced by management employment agreements. The board of directors also scheduled another telephonic meeting for July 11, 2006 in order to further study how the existing change-of-control agreements would operate in the context of the proposed transaction and to receive an update at that time on the status of Aviva’s negotiations with the eight executives with respect to the proposed management employment agreements.

At the telephonic meeting on July 11, 2006, which was attended by representatives from both Goldman Sachs and Skadden, the directors explored the potential costs of the existing change-of-control agreements and the costs and terms of the management employment agreements, which had been substantially finalized, as between Aviva and the executives. At Aviva’s request, the management employment agreements would be entered into by the executives and the Company at the execution of the merger agreement, but would only become effective upon the completion of the merger. The management employment agreements are discussed in more detail in “— Interests of the Company’s Directors and Executive Officers in the Merger.”

 

During the period between July 7 and July 12, 2006, representatives of the Company and Aviva engaged in extensive negotiations regarding the terms of the merger agreement.

 

On July 12, 2006, a meeting of the board of directors of the Company was convened in Chicago to consider whether to approve the merger agreement. At the meeting, Mr. Godlasky informed the board of directors that the proposed merger agreement had been substantially finalized. A representative from each of Skadden and Nyemaster, Goode, West, Hansell & O’Brien P.C., Iowa counsel to the Company, then outlined the directors’ fiduciary duties in relation to the merger agreement and the transactions contemplated by the merger agreement. Following this presentation, management and the board of directors reviewed certain aspects of the proposed transaction, including the consideration to be paid in the merger, the conditions to closing, the provisions with respect to termination events and termination fees and expenses, the limitations that would be placed on the Company with respect to third-party acquisition proposals, and the proposed management employment agreements to be executed with eight executives of the Company in connection with the execution of the merger agreement. Following this discussion, Goldman Sachs presented its financial analysis of the proposed transaction and delivered its oral opinion to the board of directors, which was subsequently confirmed by delivery of a written opinion, dated as of July 12, 2006, that, as of that date and based upon and subject to the factors and assumptions set forth in the written opinion, the $69.00 per share in cash to be received by the holders of the outstanding shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders. Following these presentations, the board of directors unanimously approved and adopted the merger agreement, the transactions contemplated by the merger agreement and the eight management employment agreements. Remaining details with respect to the merger agreement were finalized and it was executed later that day, as were the management employment agreements.

 

The transaction was announced via separate press releases issued by both Aviva and the Company prior to the opening of the London markets on July 13, 2006.

 

The principal purposes of the merger are to enable Aviva to acquire all of the outstanding shares of Company common stock and to provide the Company’s common shareholders with the opportunity to receive a cash payment for their shares at a premium over the market prices at which Company common stock traded before the public announcement of the merger agreement. The acquisition will be accomplished by a merger of Merger Sub with and into the Company, with the Company surviving the merger as an indirect wholly owned subsidiary of Aviva. If the merger is completed, each outstanding share of Company common stock will be converted into the right to receive $69.00 in cash. You will receive the per share amount of $69.00 in cash after you remit your certificate(s) evidencing your shares of Company common stock in accordance with the instructions contained in a letter of transmittal to be sent to you as soon as reasonably practicable after completion of the merger, together with a properly completed and signed letter of transmittal and any other documentation required to be completed pursuant to the written instructions. If you hold your shares in book-entry form — that is, without a stock certificate — the exchange agent will automatically send you the per share amount of $69.00 in cash in exchange for the cancellation of your shares of Company common stock after completion of the merger, provided that you comply with applicable tax certification requirements. If your shares of Company common stock are held in “street name” by your broker, you will receive instructions from your broker as to how to surrender your “street name” shares and receive cash for those shares.

 

At the effective time of the merger, each outstanding option to purchase shares of Company common stock, whether vested or unvested, will be converted into the right to receive an amount in cash per share subject to the

option equal to the excess, if any, of the per share amount of $69.00 in cash for holders of Company common stock over the exercise price of such option, less any required withholding taxes.

 

Each stock unit, performance unit or similar award, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger shall be converted into the right to receive an amount of cash per unit or award equal to the per share amount of $69.00 in cash for holders of Company common stock, less any required withholding taxes. Each SAR, whether vested or unvested, that is outstanding immediately prior to the effective time shall be converted into the right to receive an amount of cash per stock unit to which the SAR relates equal to the product of (1) the total number of unexercised stock units to which the SAR relates multiplied by (2) the excess of the per share amount of $69.00 in cash for holders of Company common stock over the fair market value of a share of Company common stock on the SAR’s date of grant, less any required withholding taxes.

 

The merger will terminate all interests in Company common stock held by the Company’s common shareholders, the Company will become an indirect wholly owned subsidiary of Aviva and Aviva will be the sole beneficiary of any earnings and growth of the Company following the merger. Upon completion of the merger, Company common stock will be delisted from the NYSE, will no longer be publicly traded and will be deregistered under the Exchange Act.

 

If the merger is not completed for any reason, the Company’s common shareholders and holders of stock options and other awards will not receive the merger consideration. Instead, the Company will remain a public company and shares of Company common stock will continue to be listed on the NYSE. If the merger is not completed, the Company expects to continue to conduct its business in a manner similar to the manner in which it is presently conducted. In such event, the value of shares of Company common stock would continue to be subject to current risks and opportunities, including the various factors described in the Company’s past filings with the SEC, such as the condition of the insurance industry and prevailing economic and market conditions. If the merger is not completed, Company common stock may trade at pre-announcement levels or below due to adverse market reaction. If the merger is not completed, there can be no assurance that any other transaction similar to the merger would be available to the Company. Even if such a transaction were available, there can be no assurance that such transaction would be acceptable to the Company’s board of directors and would offer the Company’s common shareholders the opportunity to receive a cash payment for their shares of Company common stock at a premium over the market prices at which Company common stock traded before the public announcement of any such transaction.

 

After careful consideration, the board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and its shareholders. Accordingly, the board of directors has unanimously approved and adopted the merger agreement and the transactions contemplated by the merger agreement. The board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement and the transactions contemplated by the merger agreement. In making this determination, the board of directors considered a number of factors which supported its decision to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the following:

 

 

 

 

 

In the course of its deliberations, the board of directors also considered a variety of risks and other potentially negative factors, including the following:

 

 

In addition, the board of directors was aware of and considered the interests that certain directors and executive officers may have with respect to the merger that differ from, or are in addition to, their interests as shareholders of the Company generally, as described in “— Interests of the Company’s Directors and Executive Officers in the Merger.”

 

The foregoing discussion of the information and factors considered by the board of directors includes material positive and potentially negative factors considered by the board of directors, but it is not intended to be exhaustive and may not include all of the factors the board of directors considered. In reaching its determination to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, the board of directors did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interests of the Company and the holders of Company common stock. Rather, the determination and recommendation of the board of directors were based on an analysis of the totality of the information presented to, and the factors considered by, the board of directors. In addition, in considering the factors described above,

individual members of the board of directors may have accorded greater or lesser relative importance to specific factors considered than did other members of the board of directors.

 

Goldman Sachs acted as the Company’s financial advisor in connection with the merger. On July 12, 2006, Goldman Sachs delivered its oral opinion to the board of directors, which was subsequently confirmed by delivery of a written opinion, dated as of July 12, 2006, that, as of that date and based upon and subject to the factors and assumptions set forth in the written opinion, the $69.00 per share in cash to be received by the holders of the outstanding shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders. Goldman Sachs subsequently confirmed its earlier opinion by delivery of its written opinion dated as of September 11, 2006.

 

The full text of the written opinion of Goldman Sachs, dated as of September 11, 2006, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Goldman Sachs in connection with the opinion, is attached as Annex B to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of Company common stock should vote with respect to the merger.

 

In connection with rendering the opinion described above, Goldman Sachs reviewed, among other things:

 

 

 

 

 

 

 

Goldman Sachs also has held discussions with members of the Company’s senior management regarding their assessment of the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs:

 

 

Goldman Sachs relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of

rendering the opinion described above. In that regard, Goldman Sachs assumed, with the consent of the Company’s board of directors, that the internal financial forecasts prepared by the Company’s management were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the Company.

 

Goldman Sachs discussed the Milliman Reports, the Milliman Memos and the Company Memos with the management of the Company, and the Company has consented to Goldman Sachs’ reliance on the Milliman Reports, Milliman Memos and the Company Memos in performing its analyses. Goldman Sachs is not an actuarial firm and its services did not include any actuarial determination or evaluation or any attempt to evaluate actuarial assumptions, and it has relied on the actuaries of the Company with respect to the adequacy of reserves for the Company’s insurance and investment contract liabilities. In that regard, Goldman Sachs made no analysis of, and expressed no opinion as to, the adequacy of reserves for the insurance and investment contract liabilities of the Company.

 

In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and, except for the Milliman Reports, the Milliman Memos and the Company Memos, Goldman Sachs was not furnished with any such evaluation or appraisal.

 

The following is a summary of the material financial analyses used by Goldman Sachs in connection with rendering the opinions dated July 12, 2006 and September 11, 2006. The analyses performed in connection with the July 12, 2006 opinion are referred to as the July Analyses and the analyses performed in connection with the September 11, 2006 opinion are referred to as the September Analyses. The order of analyses described does not represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before September 6, 2006 and is not necessarily indicative of current market conditions.

 

Historical Stock Trading Analysis

 

Goldman Sachs reviewed the historical trading prices and volumes for shares of Company common stock for the time periods from January 29, 1997 to June 23, 2006, the last trading day prior to receiving the $69.00 per share verbal proposal from Aviva, and from June 23, 2006 to July 10, 2006, and from July 10, 2006 to September 6, 2006. Goldman Sachs calculated the weighted average price per share of Company common stock for such periods and compared the results of such analysis to the per share amount of $69.00 in cash to be received by holders of outstanding shares of Company common stock. Goldman Sachs also reviewed the number of shares of Company common stock traded on the NYSE for the periods from January 29, 1997 to June 23, 2006, from June 23, 2006 to July 10, 2006, and from July 10, 2006 to September 6, 2006. The result of this analysis is summarized below:

 

 

Comparison of Selected Life Insurance Companies

 

Using median estimates from the Institutional Brokerage Estimate System, or IBES, a data service provided by First Call that compiles estimates of securities research analysts, Goldman Sachs reviewed and compared selected

financial information and multiples for the Company to corresponding financial information and multiples for the following life insurance companies:

 

 

Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of AmerUs.

 

Goldman Sachs calculated the price to earnings multiples, or P/E multiples, and the price to book value multiples, or P/BV multiples, for the Company at, among other dates and amounts, (1) $69.00 per share of Company common stock, (2) the closing price of $67.80 per share for shares of Company common stock on the NYSE on September 6, 2006, (3) the closing price of $65.97 per share for shares of Company common stock on the NYSE on July 10, 2006 and (4) the closing price of $53.00 per share for shares of Company common stock on the NYSE on June 23, 2006, the last trading day prior to receiving the $69.00 per share verbal proposal from Aviva. The multiples and other financial information calculated by Goldman Sachs are based, in the July Analyses, on the closing prices on July 10, 2006 for shares of the Company and the selected companies’ common stock and the most recent publicly available information for the Company and the selected companies as of July 10, 2006, and in the September Analyses, on the closing prices on September 6, 2006 for shares of the Company and the selected companies’ common stock and the most recent publicly available information for the Company and the selected companies as of September 6, 2006. Goldman Sachs’ analysis of the selected companies compared the following to the results for the Company:

 

 

 

The results of the July Analyses with respect to the Company are summarized below:

 

 

The results of the July Analyses with respect to the selected life insurance companies are as follows:

 

 

 

The results of the September Analyses with respect to the Company are summarized below:

 

 

The results of the September Analyses with respect to the selected life insurance companies are as follows:

 

 

Comparison of Selected North American Life Insurance Transactions Since 2001

 

Goldman Sachs analyzed information relating to the following 17 transactions in the life insurance industry since 2001:

 

 

Goldman Sachs compared the following information relating to the selected transactions to the proposed merger:

 

 

The results of this analysis of the selected transactions were as follows:

 

 

Implied Premiums/Multiples at Transaction Price Analysis

 

Goldman Sachs calculated the implied premiums and multiples represented by $69.00 per share in cash to be received by the holders of Company common stock pursuant to the merger based on the following trading prices for Company common stock:

 

 

 

 

 

 

The results of Goldman Sachs’ calculations of implied premiums at the transaction price of $69.00 per share are as follows:

 

 

The results of Goldman Sachs’ calculations of implied multiples at the transaction price of $69.00 per share in the July Analyses are as follows:

 

 

 

The results of Goldman Sachs’ calculations of implied multiples at the transaction price of $69.00 per share in the September Analyses are as follows:

 

 

 

Price to Book Value versus Projected Return on Average Common Equity Regression Analysis

 

Goldman Sachs analyzed the implied relationship between a company’s multiple of trading price to book value versus its projected ROACE. Goldman Sachs examined this relationship by performing a regression analysis on the selected companies utilizing IBES median EPS estimates and the latest available financial statements. This analysis

indicated an implied relationship between the P/BV (ex-AOCI) multiple and 2006E ROACE. Applying this general relationship to the Company’s 2006E ROACE produced an implied or theoretical P/BV (ex-AOCI) multiple of approximately 1.6x in each of the July Analyses and September Analyses, although the actual multiple as of June 23, 2006 was 1.3x. The following table sets forth the P/BV (ex-AOCI) multiples for the Company at the transaction price of $69.00 per share and the closing price of each of July 10 and June 23, 2006 in the July Analyses.

 

 

The following table sets forth the P/BV (ex-AOCI) multiples for Company at the transaction price of $69.00 and the closing price of each of September 6, July 10 and June 23, 2006 in the September Analyses.

 

 

Dividend Discount Analysis

 

Goldman Sachs performed a dividend discount analysis to determine a range of potential equity values of Company common stock. The range was determined by adding the present value of an estimated future dividend stream for the Company over the five-year period from 2006 through 2010, and the present value of an estimated terminal value of Company common stock at the end of 2010. In performing its analysis, Goldman Sachs made the following assumptions, among others:

 

 

The September Analyses implied a fully diluted equity value of $45.20 to $69.92 per share of Company common stock, as illustrated by the following table:

 

 

Company-Prepared Estimate of Actuarial Appraisal and Group Net Value

 

The Company engaged Milliman, Inc. to prepare the Milliman Reports and the Milliman Memos in connection with the transactions contemplated by the merger agreement in order to obtain a third-party opinion as to the actuarial value of the Company. Based on the Milliman Reports and the Milliman Memos, the Company’s actuaries prepared the Company Memos, in which the Company calculated the total net actuarial value per share of Company common stock and the actuarial value of new business per share of Company common stock, assuming various numbers of years of new business and various discount rates. These values were calculated assuming risk-based capital, or RBC, ratios of 250% and 300%. The RBC ratio is derived by dividing the total adjusted capital of an insurance company (as determined by the RBC formula set forth by the National Association of Insurance Commissioners, or the NAIC) by the company’s RBC (as determined by the RBC formula set forth by the NAIC). For purposes of these calculations and the review by Goldman Sachs of the Company Memos, the Company advised Goldman Sachs that it believed the 300% RBC ratio was the appropriate level to review, as the Company’s RBC ratio is currently in excess of 300% and because the Company believed a 300% RBC ratio was appropriate and consistent with the valuation RBC levels of companies of similar size and with similar ratings. Goldman Sachs did not participate in the preparation of this analysis or determination of any of the assumptions or levels of variables employed by the Company in its preparation, and it relied without independent verification upon the Company’s calculations.

 

The results of the calculation of total actuarial value per share as of June 30, 2006 in the September Company Memo are as follows:

 

 

The results of the calculation of actuarial value of new business per share as of June 30, 2006 in the September Company Memo are as follows:

 

 

The results of the calculation of actuarial value of new business per share as of June 30, 2006 in the September Company Memo, expressed as a percentage of total net actuarial value per share are as follows:

 

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the merger.

 

Goldman Sachs prepared these analyses for the purpose of providing its opinion to the Company’s board of directors as to the fairness from a financial point of view to the holders of the outstanding shares of Company common stock of the per share amount of $69.00 in cash to be received by such holders. These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither the Company nor Goldman Sachs nor any other person assumes responsibility if future results are materially different from those forecast.

 

The per share amount of $69.00 in cash to be paid in the merger was determined through arm’s-length negotiations between the Company and Aviva and was approved by the board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

 

As described above, Goldman Sachs’ opinion to the board of directors was one of many factors taken into consideration by the board of directors in making its determination to approve and adopt the merger agreement and the transactions contemplated by the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as the Company’s financial advisor in connection with, and has participated in certain negotiations leading to, the merger. Goldman Sachs has provided certain investment banking services to the Company from time to time, including having acted as a book-running underwriter for the issuance of the Company’s 5.95% Senior Notes Due 2015 (aggregate principal amount $300,000,000) in August 2005, a book-running underwriter for the issuance of the Company’s Series A Non-Cumulative Perpetual Preferred Stock (aggregate principal amount $150,000,000) in September 2005 and a book-running underwriter in connection with the remarketing of the Company’s 6.583% Senior Notes due May 16, 2011 (aggregate principal amount $143,750,000) in May 2006. Goldman Sachs is also a lender in the Company’s $300,000,000 revolving credit facility. Goldman Sachs also has provided certain investment banking services to Aviva from time to time, including having acted as financial advisor to Aviva

in the sale of its general insurance businesses in Australia and New Zealand in January 2003, financial advisor to Aviva in the sale of its joint venture interest in Global Aerospace Underwriting Managers Ltd. in March 2003, a book-running underwriter for the issuance of Aviva’s 5.25% Step-up Bonds due 2023 (aggregate principal amount €650,000,000) in September 2003, a book-running underwriter for the issuance of Aviva’s 4.729% Perpetual Fixed/Straight Bonds due 2014 (aggregate principal amount €700,000,000) in November 2004, a book-running underwriter for the issuance of Aviva’s 5.902% Perpetual Fixed/Straight Bonds due 2020 (aggregate principal amount £500,000,000) in November 2004, financial advisor to Aviva in the sale of its Asian general insurance business in March 2005, financial advisor to Aviva in connection with its acquisition of RAC plc in June 2005 and financial advisor to Aviva in connection with its acquisition of Ark Life Assurance Company Limited in December 2005. Goldman Sachs also may provide investment banking services to the Company and Aviva in the future.

 

Goldman Sachs is a full-service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to the Company, Aviva and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of the Company and Aviva for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

The Company’s board selected Goldman Sachs as a financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated March 1, 2006, the Company engaged Goldman Sachs to act as its financial advisor in the event of a possible sale of the Company. Pursuant to the terms of this engagement letter, the Company agreed to pay Goldman Sachs a transaction fee equal to 0.625% of the aggregate consideration paid for the Company’s equity securities (including amounts paid to holders of options, warrants and convertible securities) plus the principal amount of all indebtedness for borrowed money as set forth on the balance sheet of the Company as existing immediately prior to the completion of the sale, or approximately $23 million, all of which is contingent upon completion of the merger. In addition, the Company has agreed to reimburse Goldman Sachs for its reasonable expenses, including attorneys’ fees and disbursements (which shall not exceed $50,000 for attorneys’ fees and disbursements or $150,000 for other expenses without the prior consent of the Company, which shall not be unreasonably withheld), and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

When considering the recommendation by the Company’s board of directors, you should be aware that a number of the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the Company’s other shareholders. The Company’s board of directors was aware of these interests and considered them, among other matters, in unanimously adopting and approving the merger agreement and the transactions contemplated by the merger agreement. Such interests relate to, or arise from, among other things:

 

 

 

All these additional interests are described below, to the extent material, and, except as described below, such persons have, to the knowledge of the Company, no material interest in the merger apart from those of the Company’s common shareholders generally.

 

Supplemental Benefit Agreements (also called change-of-control agreements)

 

The Company’s executive officers have entered into change-of-control agreements with the Company, most of which were amended and restated in 2003. Completion of the merger would constitute a change of control under these agreements. In an effort to retain the executive officers and encourage them to continue their employment with the Company following the merger, at the request of Aviva, the Company entered into employment agreements with each of the executive officers, other than Ms. Urion. The employment agreements will become effective upon completion of the merger and will replace each of the executive officers’ change-of-control agreements. Accordingly, only Ms. Urion has retained the right to receive severance payments under the change-of-control agreements in connection with the merger. Ms. Urion’s agreement provides that in the event of a change of control of the Company followed by a termination by her for “good reason” or a termination of her employment without “cause” (as such terms are defined in the change-of-control agreement), she will be entitled to: (1) a cash severance payment in an amount equal to three times her annual base compensation and target bonus; (2) continuation of employee medical benefits; and (3) immediate vesting of benefits under the All«AmerUs Supplemental Executive Retirement Plan and the All«AmerUs Excess Benefit Plan. Under her agreement, upon completion of the merger, Ms. Urion would have good reason to terminate employment and receive change-of-control cash severance and other benefits under the agreements, because she will cease to be an executive officer of a public company. The approximate value of the severance benefit that would be payable to Ms. Urion under her change-of-control agreement, if she were to terminate employment immediately after the merger would be $2,185,000. Ms. Urion will also be entitled to receive a payment intended to make her whole with respect to the imposition of any parachute excise tax with respect to any payments or benefits.

 

Employment Agreements

 

Aviva desired to have the remaining change-of-control agreements replaced by employment agreements, which would not entitle the executive officers to such change-of-control payments. Following negotiations with Aviva as to the terms of the proposed employment agreements, Mr. Godlasky, Mr. Boal, Mr. Boltz, Mr. Clark, Mr. Heitz, Mr. Littlefield, Mr. McPhail and Ms. Cushing entered into employment agreements with the Company on July 12, 2006, which will become effective upon completion of the merger and replace the change-of-control agreements.

 

Each employment agreement has a term of three years, with subsequent automatic one-year renewals unless notice is given. Each executive will be entitled to participate in all employee benefit plans and welfare benefits which are generally available to the Company’s senior executives and will receive an automobile allowance of $10,000 per year. Each executive will also participate in annual incentive and long-term incentive plans. These

plans will generally provide payments to the executives only upon attainment of performance goals set by Aviva in consultation with Mr. Godlasky, who will serve as Chief Executive Officer of the surviving corporation. Pursuant to their individual agreements, the following executives will initially serve in these capacities as officers of the Company: Mr. Boal, Executive Vice President and Chief Investment Officer; Mr. Boltz, Executive Vice President and Chief Information Officer; Mr. Clark, Executive Vice President and Chief Product Officer; Mr. Heitz, Executive Vice President — Annuities; Mr. Littlefield, Executive Vice President and General Counsel; Mr. McPhail, Executive Vice President — Life; and Ms. Cushing, Senior Vice President and Controller. The base salaries provided in the respective agreements are as follows: Mr. Godlasky, $750,000; Mr. Boal, $475,000; Mr. Boltz, $310,000; Mr. Clark, $450,000; Mr. Heitz, $460,000; Mr. Littlefield, $400,000; Mr. McPhail, $460,000; and Ms. Cushing, $250,000.

 

Each agreement provides two retention bonuses as consideration for the executive’s continued services after the merger, including the additional responsibilities and duties that will result from the merger, and for the restrictive covenants to which the executive agrees. The first retention bonus becomes payable on the first anniversary of completion of the merger, if the executive’s employment continues on that date or upon an earlier change of control or termination by the Company without “cause” or for “disability” or by the executive with “good reason” (as those terms are defined in the agreements) or by the executive’s death. The first retention bonus for each executive was determined to represent a fair-value payment to the executive for entering into the employment agreements and agreeing to the restrictive covenants contained in the agreements. The amount of each executive’s first retention bonus will be as follows: Mr Godlasky, $5,178,000; Mr. Boal, $3,195,000; Mr. Boltz, $1,477,000; Mr. Clark, $2,695,000; Mr. Heitz, $3,049,000; Mr. Littlefield, $1,653,000; Mr. McPhail, $2,739,000; and Ms. Cushing, $825,000.

 

The second retention bonus becomes payable on the third anniversary of completion of the merger, if the executive’s employment continues on that date. The amount of each executive’s second retention bonus will be as follows: Mr. Godlasky, $3,222,000; Mr. Boal, $1,988,000; Mr. Boltz, $919,000; Mr. Clark, $1,677,000; Mr. Heitz, $1,780,000; Mr. Littlefield, $1,028,000; Mr. McPhail, $1,704,000; and Ms. Cushing, $513,000. If, prior to the third anniversary of completion of the merger, there is a termination of the executive’s employment by the Company without “cause” or for “disability” or by the executive with “good reason” (as those terms are defined in the agreements) or by the executive’s death, the executive will receive a pro-rata payment determined by multiplying the executive’s second retention bonus by a fraction, the numerator of which is the number of days of employment between the completion of the merger and the date of termination and the denominator of which is 1095.

 

If the executive’s employment is terminated by the Company during the term of the agreement other than for “cause” or “disability” or the executive terminates employment for “good reason” (as such terms are defined in the agreement), among other things, the executive will receive a severance amount equal to the sum of his annual base salary and target bonus, with the severance amount being doubled if the termination is in connection with a change of control after the merger. The executive will also receive a pro-rata payment calculated with respect to the executive’s target annual bonus in the year in which the termination occurs and, at the time when any payments of long-term incentive awards are made to other participants in the long-term incentive plan, a pro-rata payment with respect to the actual award (based on the extent of actual achievement of the long-term incentive goals) which the executive would have received but for such termination. The executive’s benefits, including medical benefits and life insurance, will continue for 12 months (or 24 months if the termination is in connection with a change of control after the merger).

 

If the executive incurs legal fees or costs to enforce his rights under the agreement, and the executive is the prevailing party, the Company will reimburse the executive for such fees and costs, and provide a tax gross-up for any resulting imputed income taxable to the executive. The executives (other than Ms. Cushing) will also be entitled to receive a payment intended to make them whole with respect to the imposition of any parachute excise tax on any payments or benefits.

 

Each executive agrees to protect the Company’s “confidential information” (as defined in the agreement), both during and after employment. Each executive agrees to provide testimony or assistance to the Company with respect to litigation or proceedings relating to the executive’s employment period with the Company, as reasonably requested. The executives are not currently subject to any non-competition or non-solicitation agreement. However,

in the employment agreement which will become effective upon completion of the merger, each executive agrees that during employment and the 12 months after termination the executive will not engage in competition with the Company or any affiliate. During the 12 months after termination the executive will not solicit, attempt to do business with, or otherwise interfere with, the Company’s business relationships with those who were customers or clients (or prospective customers or clients) of the Company at any time during the 12 months immediately prior to the executive’s termination.

 

When Aviva delivered proposed terms for the employment agreements with the executives, Mr. Godlasky retained Proskauer Rose LLP, or Proskauer Rose, to negotiate with Aviva regarding his employment agreement. Since the proposals for the eight executives were substantially similar, the employment agreement negotiated on behalf of Mr. Godlasky became the model for the Company’s agreements with all eight executives. Because retention of management was a key consideration for Aviva, the board of directors determined that the fees of Proskauer Rose would be paid by the Company.

 

Management Incentive Plan

 

Pursuant to the merger agreement if any participant in the Management Incentive Plan, or MIP, including an executive officer, is involuntarily terminated without cause within the 24-month period immediately following completion of the merger, the terminated participant will receive a pro-rated target bonus for the year of termination, and, with respect to any completed year as to which payment has not yet been made, a payment equal to the participant’s target bonus for such year.

 

MIP Deferral Plan

 

Participants in the Management Incentive Plan, including executive officers, may elect to defer bonus amounts, which are deemed invested in stock units, under the MIP Deferral Plan. Limited employer matches of the deferred amounts are made and also deemed invested in stock units, which vest after a restricted period of at least three years, or earlier upon a change of control. Pursuant to the merger agreement, upon completion of the merger each stock unit will be converted into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. The following table sets forth the amounts that the indicated executive officer will receive upon conversion of their stock units in connection with the completion of the merger, more than 85% of the stock units being attributable to previously earned bonus amounts which were deferred.

 

Long-Term Incentive Plan

 

Upon a change of control each non-vested performance unit vests. Pursuant to the merger agreement the performance unit vests at target level and is converted upon completion of the merger into the right to receive the per share amount of $69.00 in cash to be received by holders of the Company common stock in the merger. The following table sets forth the amounts that the indicated executive officers will receive upon conversion of their performance units in connection with the completion of the merger. The table includes some performance units which were determined to be earned and vested in February 2006, but were scheduled to be paid in February 2007.