Phoenix unveils £248m swoop on Sun Life
Phoenix Group is acquiring Sun Life UK, a closed book UK life insurance company, from Sun Life Financial in a £248 million deal.
Sun Life 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 c.480,000 in-force policies and c.£10 billion of assets under administration, of which c.£2.5 billion are annuities that will remain reinsured with Sun Life.
The acquisition, funded from existing cash resources, is expected to deliver c.£470 million of incremental long-term cash generation, with approximately 30% of this cash generation 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 outsourcing partner, TCS Diligenta.
Phoenix is targeting the delivery of c.£125 million of integration synergies, net of costs, from cost efficiencies and capital management actions, representing c.50% of the consideration paid.
The acquisition is expected to complete in Q1 2023.
It is Phoenix’s first acquisition to be financed solely from existing cash resources, reflecting the surplus cash and capital available for reinvestment into growth.
Phoenix said the value and cash flow generated through this acquisition support a sustainable 2.5% inorganic increase in the Group’s dividend, to take effect from and including the 2022 Final Dividend, subject to completion.
Ahead of the full year results, the board will assess if organic business growth delivered over the year can fund a further sustainable dividend increase for 2022.
Commenting on the acquisition, Phoenix Group CEO, Andy Briggs said: “The acquisition of Sun Life UK is highly attractive for Phoenix Group and demonstrates the significant value that smaller cash funded M&A transactions can deliver for our shareholders.
“We expect this acquisition to deliver incremental long-term cash generation of around £470 million, inclusive of cost and capital synergies.
“This supports a 2.5% dividend increase, in line with our ambition to sustainably grow our dividend over time.
“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.”