Phoenix Group is set to acquire closed book UK life insurance company Sun Life UK for £248m, funded from existing cash resources.
The deal is expected to deliver circa £470m of incremental long-term cash generation, with approximately 30% of this to emerge in the first three years.
Sun Life UK operates a predominantly outsourced business model, with the majority of its policy administration already undertaken by Phoenix's strategic partner TCS Diligenta, supporting a simplified operational integration programme.
The group is therefore targeting circa £125m of integration synergies, net of costs, from cost efficiencies and capital management actions, representing round half of the consideration paid.
A long-term asset management partnership with Sun Life, that complements existing relationships, has also been agreed. This should enhance and diversify liquid and illiquid credit origination capabilities in North America, building on Sun Life’s presence in the region.
The acquisition is subject to regulatory approvals and is expected to complete in the first quarter of 2023.
It also supports a 2.5% inorganic dividend increase, payable from, and including, the 2022 final dividend.
Sun Life UK represents around £10bn of the estimated £480bn UK heritage mergers and acquisitions (M&A) market.
This is Phoenix's first acquisition to be financed solely from existing cash resources, reflecting the surplus cash and capital available for reinvestment into growth. "The board continues to see M&A as a strategic priority going forward and a core part of the group’s growth strategy," read a statement.
Phoenix Group chief executive Andy Briggs said: “We welcome the colleagues who will join us from Sun Life UK, and as the UK’s largest long-term savings and retirement business with a strong track record of closed book integrations, we look forward to offering a safe home for Sun Life UK’s customers over the long term.
“I am pleased that we will also be able to offer Sun Life UK’s customers access to our broad range of Standard Life products in our open division.”
Sun Life UK operates a life company, Sun Life Assurance Company of Canada (UK), which is a closed book with life, pensions and annuity business.
It does not write new business, other than offering increments on current policies to existing customers on a passive basis.
At 31 December 2021, Sun Life UK had around 480,000 in-force policies and circa £10bn of assets under administration, of which £2.5bn are annuities that will remain reinsured with Sun Life.
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