Phoenix to acquire Abbey Life from Deutsche Bank in £935m deal

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FTSE 250-listed Phoenix Group Holdings said today that it is to acquire the Abbey Life insurance business from Deutsche Bank for a total of £935m cash, and that it is looking to complete the deal, which is subject to regulatory approval, by the end of this year.

As reported, the company, which is the UK’s largest owner of life insurance businesses that are closed to new customers, earlier this month confirmed reports that it was in “advanced” talks with the German bank to buy the Abbey Life insurance operations.

In a statement to the London Stock Exchange this morning, Phoenix Group said it plans to fund the acquisition with a combination of a £735m rights issue and another £250m from a new bank facility.

It said the deal would bring it an additional approximate £10bn in assets under management and approximately 735,000 additional policyholders.

Earlier this year, as reported,  Phoenix Group announced it would acquire AXA’s AXA Wealth UK non-platform investment and pensions business and its Sunlife direct protection business.

For Deutsche Bank, the news of the sale was seen to be a positive element – if a relatively tiny one – at a time when it has been undergoing some unwelcome investor and press scrutiny after it emerged that the US Department of Justice was seeking a massive US$14bn from the company for its alleged role in mis-selling mortgage-backed securities ahead of the 2008 financial crisis.

‘Pivotal’ deal

In the statement announcing the planned Abbey Life acquisition, Phoenix Group chief executive Clive Bannister, pictured right, said the deal was a “pivotal” one for Phoenix, as it would give the company “the platform and scale to continue as a leader in the consolidation of the UK life industry”.

He added: “The dynamics of this industry offer a number of value-accretive opportunities, as evidenced by the announcement of our acquisition of AXA Wealth’s pensions and protection business earlier this year.

“This attractively-priced deal meets precisely Phoenix’s areas of strategic focus and stated acquisition criteria, whilst significantly increasing our cash generation and supporting a further increase in our proposed dividend.

“The business models of AXA and Abbey Life are complementary, and will allow the [Phoenix] Group to gain from economies of scale. Furthermore, Abbey Life policyholders will benefit from stable ownership, improved service levels and a robust governance framework.”

Shares in Phoenix rose slightly in early trading on Wednesday.

The company now known as the Phoenix Group had its origins in London in 1857 as the Pearl Loan Company. It changed its name to the Pearl Assurance Company some decades later, and traded hands numerous times, including a stint when it was party of the Henderson group.

After that it was bought by Hugh Osmond’s Sun Capital Partners in 2005, then by Liberty Acquisition Holdings in 2009, becoming known as the Pearl Group along the way.  It was renamed Phoenix Group Holdings in 2010.