Phoenix Group’s proposal to acquire rival life insurer ReAssure Group in a £3.2bn cash and shares deal has included ReAssure’s self-invested personal pensions (SIPP) assets.
As it stands the agreement would bring £84bn in AUA and some 4.1 million ReAssure policies under the Phoenix umbrella for its heritage business. The deal will see the new FTSE 100 constituent reach total assets under administration (AUA) of £329bn and confirm it as Europe's largest pensions consolidator.
A Phoenix spokesperson said the acquisition would not have an impact on ReAssure's advisers SIPP customers. Phoenix will also retain ReAssure's Alpha platform for the near future.
The spokesperson from Phoenix added: "Advisers and customers or anything like that, of the ReAssure book, nothing is going to change at all in the near term - we are sticking with the same customer teams, the same platform, for a couple of years at least."
Phoenix will also take over the operation of ReAssure's contract-based workplace pension provision, but would not immediately merge this, or the independent governance committee, with its own contract-based scheme. The insurer said this "would be reviewed at some point" but there was no "definitive date" yet.
In the announcement today (6 December) Phoenix Group said it expects the acquisition would generate additional cash flows of £7bn over time, £2.7bn of which would be between 2020 and 2023. Cost and capital synergies of £800m could also be achieved by leveraging Phoenix's operating model, the group added.
Chief executive Clive Bannister said: "This is a highly attractive acquisition for Phoenix that follows our growth strategy and delivers value to our shareholders. The purchase price is attractive as is the efficient financing structure. Together, this enables us to maintain our balance sheet strength."
ReAssure is currently jointly owned by Zurich-headquartered Swiss Re and Japanese insurer MS&AD Insurance Group Holdings; in turn it has two principal operating subsidiaries, ReAssure Limited and Ark Life Assurance Company, which conduct British and Irish operations respectively.
Swiss Re and MS&AD would own a combined 28% of the enlarged Phoenix Group under the terms of the proposal and both will hold a seat on the company's board. Phoenix's largest shareholder, Standard Life Aberdeen (SLA), would have an ownership stake of around 14.5% moving forward.
SLA chief executive Keith Skeoch said: "Today's announcement by Phoenix illustrates the substantial consolidation opportunities that exist within the UK and European insurance sectors, which was a key factor in our making our strategic investment in Phoenix."
The proposal for the acquisition of ReAssure has come after Swiss Re pulled June plans for its float on the London Stock Exchange and remained on the lookout to dispose of the business to better streamline its operations to continental Europe.
ReAssure has made major market moves of its own however, buying heritage life and pensions firm Old Mutual Wealth Life Assurance in August following the restructure and rebrand of its parent company into Quilter.
This followed ReAssure's acquisition of the mature savings business of L&G Business Group, first announced in December 2017, comprising principally of retail customers holding insurance-based pensions and investment products. Both of these acquisitions are expected to complete early next year.
The deal has come nearly six years after Phoenix and ReAssure first discussed a potential merger. If completed, the integration is expected to be finalised by mid-2020.
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