28th Sep 2016 07:19
LONDON (Alliance News) - Pension book purchaser Phoenix Group Holdings said Wednesday it is ready to acquire the Abbey Life insurance business from Deutsche Bank AG for a total of GBP935.0 million in cash.
FTSE 250-listed Phoenix said it is aiming to complete the acquisition by the end of 2016, subject to regulatory approvals. It will be funded by the combination of a GBP735.0 million rights issue and GBP250.0 million from a new bank facility.
The deal for the closed life assurance fund would bring in approximately GBP10.0 billion in assets, which Phoenix estimates will generate GBP500.0 million in aggregate cashflows between 2016 and 2020 and GBP1.10 billion in aggregate from 2021 onwards.
Phoenix said it will use the increased cashflow to boost its dividend paid in 2017 by GBP197.0 million, an increase of 5% in dividend per share. Phoenix said this would be on top of a 5% dividend increase made possible by its acquisition of the AXA Wealth business earlier this year and lead to a 10% hike in its dividend from 2015, a level which it believes is sustainable going forward.
Phoenix said it expects to generate capital and cost benefits as it implements changes, including GBP7.0 million in yearly efficiency savings and migrating Abbey Life to its internal Solvency II capital requirement model. It expects the acquisition to increase its Solvency II surplus to GBP1.5 billion from GBP1.1 billion and its capital coverage ratio to 151% from 144%.
Shares in Phoenix were up 1.1% at 847.50 pence early Wednesday.
By Adam Clark; [email protected]
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