Well it’s a bit of a big deal Thursday. One of the oldest names in UK insurance, Sun Life, has been bought by Phoenix Group, subject to regulator approval. It will be interesting to see what changes Phoenix can make to the Sun Life core product line-up. The Life cover market is evolving alongside a 21st century society, where 25% of households are single person, many couples are childless by choice and so the old fear factor marketing of providing for loved ones after death doesn’t really sell the product.
You look at companies like Dead Happy and Bequest and you can see the future. Life cover is becoming Legacy Planning. Your legacy defines you and leaves a digital footprint which is an emotional statement, as much as any financial gift.
Here’s the word from Phoenix;
The Board of Phoenix Group Holdings plc (“Phoenix Group” or the “Group”) is delighted to announce the acquisition of Sun Life UK, a closed book UK life insurance company, from Sun Life Financial Inc. (“Sun Life”) for cash consideration of £248million. This equates to an attractive price to shareholder Own Funds ratio of 83% in line with the Board’s disciplined approach to the deployment of shareholder capital.
The acquisition is expected to deliver c.£470 million of incremental long-term cash generation, with approximately 30% of this cash generation to emerge in the first three years.
Sun Life UK operates a predominantly outsourced business model with the majority of its policy administration already undertaken by our strategic outsourcing partner (TCS Diligenta), which supports a simplified operational integration programme. We are targeting the delivery of c.£125 million of integration synergies, net of costs,from cost efficiencies and capital management actions, representing c.50% of the consideration paid.
In line with our strategy to diversify our credit portfolio, we have also agreed a new long-term strategic asset management partnership with Sun Life that complements our existing relationships. This will further enhance and diversify our liquid and illiquid credit origination capabilities in North America, building on Sun Life’s strong presence in the region. The acquisition is subject to regulatory approvals and is expected to complete in Q1 2023.
M&A remains an ongoing strategic priority
Sun Life UK represents c.£10 billion of the estimated £480 billion UK Heritage M&A market. This is our first acquisition to be financed solely from existing cash resources, reflecting the surplus cash and capital available for reinvestment into growth. Such additions to our Heritage business can deliver significant shareholder value by leveraging our marketleading expertise in delivering accretive M&A and realising material integration synergies. The Board continues to see M&A as a strategic priority going forward and a core part of the Group’s growth strategy.
LINKLATERS COMMENT
Linklaters has advised long-term savings and retirement business Phoenix Group on its £248m acquisition of SLF of Canada UK (Sun Life UK), a UK closed book life insurance company, from Sun Life Financial Inc. The transaction is subject to regulatory approval and is expected to close in Q1 2023.
Sun Life UK represents c.£10bn of the estimated £480bn UK Heritage M&A market, and this transaction represents Phoenix Group’s first acquisition to be financed solely from existing cash resources, reflecting the surplus cash and capital available for reinvestment into growth. This acquisition is expected to deliver c.£470 million of incremental long-term cash generation for Phoenix Group, with approximately 30% of this cash generation to emerge in the first three years.
The Linklaters team was led by corporate partners Dan Schuster-Woldan and Lorna Tennent, together with corporate associate Cameron Western. Lynne Walkington advised on tax matters, and counsel Richard Cole advised on investment management matters. Partner Cara Hegarty and counsel Julie Sharp advised on employment and incentives matters and partner Sarah Parkin and counsel Alasdair Smith advised on pensions matters. On IP matters partner Ian Karet advised and counsel So Yeon Um advised on TMT matters.
This M&A mandate for Phoenix Group continues Linklaters’ excellent track record of advising on high profile M&A transactions within the insurance sector.
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