(qlmbusinessnews.com via uk.reuters.com — Thur, 4th Aug 2022) London, UK —
Phoenix (PHNX.L) has bought closed life insurer Sun Life of Canada's UK unit for 248 million pounds ($301 million) in cash, it said on Thursday and its chief executive said the insurer had more than one billion pounds to spend on similar deals.
Phoenix specialises in buying and operating books of life insurance businesses which are closed to new customers.
Closed life insurance specialists like Britain's Phoenix say they can use economies of scale to run such books more cheaply.
“We have over a billion pounds of remaining firepower as of the year-end,” CEO Andy Briggs told Reuters by phone.
“We would still be interested in larger-scale M&A, but alongside that we think there's the potential for a series of these smaller cash-funded deals.”
Sun Life manages around 10 billion pounds of closed life policies in a market totalling around 480 billion, Phoenix said.
The deal enables Phoenix to offer a 2.5% dividend increase, payable from its 2022 final dividend.
The purchase is expected to deliver around 470 million pounds of long-term cash generation, and Phoenix said it was targeting 125 million pounds of cost savings from the deal.
Phoenix shares were up 1.9% at 665 pence at 0712 GMT, one of the top performers in the FTSE 100 (.FTSE). KBW analysts called the deal “strategically sensible”, reiterating their “outperform” rating on the stock.
As part of the deal, Sun Life will form a long-term partnership to become a strategic asset management partner to Phoenix, the Canada-based insurer said in a separate statement.
BoA Securities advised Phoenix and Fenchurch Advisory Partners advised Sun Life UK.