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Phoenix makes ?3.2bn offer for Swiss Re's ReAssure Group

By Frank Prenesti

Date: Friday 06 Dec 2019

(Sharecast News) - Phoenix Group Holdings said it had made a £3.2bn cash and shares offer for Swiss Re's UK unit ReAssure Group.
The acquisition was forecast to generate extra cash flows of around £7bn over time, of which £2.7bn was expected to be generated between 2020 and 2023 and a further £4.3bn from 2024 onwards, Phoenix said on Friday.

Life insurance closed book consolidator ReAssure is owned by Swiss Re and MS&AD Insurance Group Holdings. The deal would add £84bn of assets under administration and about 4.1m policies.

Phoenix said it expected cost and capital synergies of £800m by leveraging its "highly efficient" operating model, adding that the deal will be financed by £1.2bn in cash through its own resources and debt facilities.

Swiss Re would end up with a 13% - 17% stake in Phoenix worth £2bn, while MS&AD would take an 11% - 15% holding.

Phoenix said it expected cost and capital synergies of £800m by leveraging its "highly efficient" operating model, adding that the deal will be financed by £1.2bn in cash through its own resources and debt facilities.

The synergies included annual post-tax cost savings of £40m a year by 2023, valued at £400m, and non-recurring capital synergies of £450m. Post-tax integration costs were estimated at £50m.

ReAssure held around 3m policies at November 1 and £44bn of assets under administration. The Group focuses exclusively on the acquisition and management of closed books. It does not write new business, other than offering increments on current policies to existing customers on a passive basis, Phoenix added.

Analaysts at Olivetree Financial said the deal "isn't a huge surprise, though there will be some question marks around timing and open vs closed book strategy, as well as deliverability from new management".

"However, we conclude that the new guidance of 3% dividened per share accretion looks very conservative. We estimate £0.4bn value creation from the deal, or 7-8% of Phoenix's market cap, so would expect a positive market reaction."



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