Phoenix to acquire Swiss Re's UK business for $4.1 bn
06 December 2019
UK’s Phoenix Group Holdings has agreed to buy the British reassurance business of Swiss Re for 3.2 billion pounds ($4.1 billion) in cash and shares, the UK insurer’s biggest deal so far, as consolidation of insurance companies continued.
The board of Phoenix Group Holdings plc on Thursday announced the proposed acquisition of ReAssure Group plc, a leading life insurance closed book consolidator in the United Kingdom, Phoenix stated in a release.
Hit by tougher capital rules since the financial crisis, many insurance companies are seeking to sell legacy books of business to free up capital to invest in high-growth areas.
The shareholders in ReAssure have satisfied through a mixture of cash and shares issued to Swiss Re, part of which will be transferred to MS&AD Insurance Group Holdings Inc.
The acquisition confirms Phoenix as Europe’s largest life and pensions consolidator.
The acquisition brings additional scale to Phoenix’s Heritage business, creating an enlarged Group with £329 billion of assets under administration and 14.1 million policies, confirming Phoenix’s position as the largest life and pensions consolidator in Europe.
The acquisition is expected to generate additional cash flows of approximately £7.0 billion over time, of which approximately £2.7 billion is expected to be generated between 2020 and 2023 and a further £4.3 billion from 2024 onwards.
It will also result in cost and capital synergies of £800 million by leveraging Phoenix’s highly efficient operating model and approach to capital management.
The deal is the latest in a rapidly consolidating industry as many insurance companies, hit by tougher capital rules since the financial crisis, seek to sell legacy books of business to free up capital to invest in high-growth areas.
The acquisition will add £84 billion of assets under administration and approximately 4.1 million policies.
The acquisition enhances all of Phoenix’s key attributes of cash, resilience and growth and supports a proposed 3 per cent increase in the dividend. It also confirms Phoenix’s position as Europe’s largest life and pensions consolidator:
The acquisition is expected to generate a total of £7.0 billion of additional aggregate cash flows, taking total long-term cash generation of the enlarged Group to £19.0 billion. This additional cash generation supports a proposed 3 per cent increase in the dividend per share, payable from and including the 2020 final dividend.
The group’s estimated Solvency II Surplus as of 30 September 2019 is expected to increase from £3.0 billion to £4.2 billion on a pro-forma basis, giving a shareholder capital coverage Ratio of 148 per cent. This will increase by completion from the delivery of expected synergies and planned hedging actions.