Phoenix to buy Swiss Re's ReAssure unit for £3.2b

London

INSURANCE group Phoenix Group Holdings said it had agreed to buy the British unit of Swiss Re for £3.2 billion (S$5.7 billion) in cash and shares, its biggest deal to date.

The deal is the latest in a rapidly consolidating sector as many insurance companies, hit by tougher capital rules since the financial crisis, seek to sell old books of business to free up capital to invest in high-growth areas.

By consolidating lots of books together, Phoenix aims to run the business more efficiently. Its strong growth helped propel it into Britain's blue chip FTSE 100 this year.

"The deal confirms Phoenix's position as Europe's largest life and pensions consolidator," outgoing Phoenix chief executive Clive Bannister said in a statement, adding that it took its total assets to £329 billion.

It would also give the company an "enhanced platform to pursue further growth opportunities", he said, including in the active market for insuring defined benefit, or final salary, pension schemes, so-called "bulk annuities".

Aviva and M&G are among a group of large insurers with substantial legacy books of insurance business that analysts have speculated could hit the market. The pipeline for large bulk deals is also strong.

Phoenix Group, Europe's largest owner of life assurance funds closed to new customers, said acquiring ReAssure was expected to bring in additional cash flows of about £7 billion over time.

Swiss Re said it would get a cash payment of £1.2 billion and a stake in Phoenix of 13 per cent to 17 per cent. ReAssure's minority shareholder, MS&AD Insurance Group Holdings, will receive shares in Phoenix representing an 11 per cent to 15 per cent stake. REUTERS