ReAssure is a life and pensions firm in the UK which buys and administers closed books of business from other companies
Swiss Re to offload ReAssure Group to Phoenix. Photo: courtesy of Swiss Re.
Swiss Re has agreed to sell its subsidiary ReAssure Group, a UK-based life insurance closed book consolidator, to Phoenix Group in a cash-cum-stock deal worth £3.25bn.
Founded originally in 1963, ReAssure is a life and pensions firm which buys and administers closed books of business from other companies. The life and pensions company claims to have around 2.2 million policies on its books, while managing investments of nearly £39bn for its customers.
Why Phoenix is acquiring ReAssure
The acquisition of ReAssure is expected to bring additional scale to Phoenix’s Heritage business and will result in an enlarged group with £329bn of assets under administration and 14.1 million policies.
Phoenix, currently, specialises in taking over and managing closed life and pension funds.
Phoenix Group CEO Clive Bannister said: “This is a highly attractive acquisition for Phoenix that follows our growth strategy and delivers value to our shareholders. The acquisition will contribute £7 billion of incremental cash generation and give us the opportunity to capture significant cost and capital synergies.
“The purchase price, at 91% of ReAssure’s pro-forma Solvency II Own Funds, is attractive; as is the efficient financing structure. Together, this enables us to maintain our balance sheet strength.”
As part of the transaction, Swiss Re will reacquire a 25% stake that is currently held in ReAssure by MS&AD Insurance Group for £1bn worth of shares in Phoenix at the time of signing the deal.
Under the terms of the deal, Swiss Re will be paid £1.2bn plus a stake of 13-17% in Phoenix. MS&AD, which is a Japanese insurance company, will get a stake of 11-15% in Phoenix for its part of the sale.
Swiss Re and MS&AD, put together, will have a fixed stake of around 28% in Phoenix. However, their respective number of shares will be based on Phoenix’s share price at closing of the sale.
Standard Life Aberdeen, which is the current largest shareholder in Phoenix, will have an ownership stake of around 14.5% in the latter.
Swiss Re Group CEO Christian Mumenthaler said: “We believe this transaction maximises long-term value for Swiss Re shareholders. Swiss Re’s goal has been to deconsolidate ReAssure, and we are pleased to have found a strong buyer for the business.
“The strategic rationale for the combination of the businesses is compelling, and we look forward to working together with Phoenix and to sharing the financial benefits of the combination.”
The transaction, which is subject to approvals from Phoenix’s shareholders, regulators, and anti-trust authorities, is likely to be closed in mid-2020.