Phoenix Group, the acquisition-hungry UK insurer, is the frontrunner to buy Sun Life, a smaller UK rival being sold by France’s Axa for as much as £500m.
The deal could be sealed as soon as next week, although people close to the situation warned that nothing had been finalised.
Axa, one of Europe’s largest insurers, is selling a trio of businesses including Sun Life as it tries to complete its exit from UK life assurance. Having failed to sell them as a unit, it is now in talks with different bidders for each of the businesses.
Sun Life, which sells life assurance to the over 50s, is the largest of them.
Phoenix, which has a market capitalisation of £2bn, specialises in buying life assurers that no longer accept new customers. It has made no secret of its desire to make acquisitions to increase its scale. Last year it lost out to Swiss Re in the £1.6bn battle for Guardian Financial Services. Swiss Re has also been following the Sun Life sale process, one person said.
Phoenix, meanwhile, is also bidding for Abbey Life, a Bournemouth-based life assurer being sold by Deutsche Bank.
Consolidation in European insurers is gathering steam again after a lull at the turn of the year as the industry adjusted to the new Solvency II capital rules. But while last year’s dealmaking involved whole companies being taken over, bankers say that this year’s M&A is more likely to involve insurers shaving off parts of their business in an effort to improve their focus. Low interest rates have also forced insurers to rethink their business models.
This month Aegon agreed to sell £6bn of annuities to Rothesay Life and said it would seek to sell the remaining £3bn portfolio.
Axa, which is being advised by Fenchurch Advisory Partners and Barclays, is also selling Elevate, an investment platform. Bloomberg reported last week that Standard Life is in advanced talks for the business. The group’s Isle of Man-based investment operation, thought to be worth about £200m, is also on the block.
The company has focused on general insurance in the UK in recent years. Its UK market share in property and casualty insurance has grown from 5 per cent to 8 per cent over the past five years and the UK now accounts for 15 per cent of the group’s P&C revenues. In life assurance, on the other hand, the UK only accounts for 1 per cent of group revenues.
In 2010 Axa sold the bulk of its UK life assurance business to Resolution in a £2.75bn deal.
Phoenix, Axa and Standard Life all declined to comment.
Source: Financial Times