March: Phoenix Group Holdings said it would use proceeds from the sale of its asset management business to pay down debt, helping it focus on its life insurance business and giving it faster access to debt for acquisitions.
Shares in the company, which makes money by buying European life funds that are closed to new customers and running them more efficiently, rose as much as five percent on the London Stock Exchange yesterday morning.
Phoenix reported a two percent jump in full-year operating profit and said it would sell its Ignis Asset Management business to larger rival Standard Life Plc for £390m ($643.71m). The insurer said it would use the proceeds to repay about £250m of its Impala debt facility.
It persuaded lenders early last year to raise a cap they had imposed on dividend payments and negotiated the repayment of its £2.3bn debtpile.
Phoenix cut its debt by about £700m to £1.6bn in 2013. Including the repayment from the deal, debt will come down to £1.4bn, the company said.
“The reduction in gearing will accelerate our access to the wider debt capital markets and strengthens our position as an acquirer of closed life businesses,” Chief Executive Clive Bannister said.
Phoenix said last March that it was ready to consider acquisitions — for the first time in two years. However, since then, the insurer has not signed any deals.
Talks to buy Swiss Re’s Admin Re business for a reported 3 billion pounds fell through in November. The Swiss reinsurer was slated to take a minority shareholding in Phoenix.
Bannister said yesterday the attempt to buy Admin Re was an indication that Phoenix was determined to do the right transaction.
“This is a key step in the restructuring of Phoenix, broadening the range of M&A targets that management could potentially pursue,” Berenberg analyst Matthew Preston wrote in a note.
Phoenix said it agreed to a long-term asset-management alliance with Standard Life Investments as part of the deal.
“When we go out and do a closed life transaction, and Standard Life manages those assets, for the duration they manage those assets we will get a share of revenues coming from those assets, and that share of revenue will be 15 to 20 percent,” Bannister said.
The insurer said it would continue to benefit from Ignis’ earnings in the period of the deal’s completion, which is expected by the end of the second quarter.
Reuters
