Phoenix pulls off £3.2bn Swiss Re deal to create pensions colossus

The dealmaking frenzy gripping the UK insurance sector accelerated on Friday after Britain’s two largest buyers of historic insurance policies joined forces in a landmark £3.2 billion takeover.

Phoenix, one of a new breed of insurance consolidators, has agreed to buy Swiss Re’s UK business ReAssure in a cash and shares deal making Phoenix the UK’s fourth-largest insurer.

The transaction comes just months after Swiss Re shelved a public stock-market listing of ReAssure due to Brexit uncertainty.

Phoenix will give Swiss Re and ReAssure’s minority shareholder MS&AD £1.2 billion in cash and a 28% stake in the enlarged group. Swiss Re and Japanese insurance company MS&AD will also get two board seats.

ReAssure was bought by Swiss Re in 2003 and has around four million insurance contracts sold to customers in the 1960s and 1970s through brands such as Ark, Guardian and Legal & General.

Phoenix and ReAssure are the UK’s two biggest rivals in the insurance consolidation sector, and the combination will give them substantial firepower to hunt abroad for deals.

Traditional insurance companies have been looking to shed books of vintage contracts to upstart consolidators, such as Rothesay, Pension Insurance Corporation and Just Group, to free capital in recent years, prompting a dramatic reshaping of the financial services industry. This year has seen the biggest jump in global insurance deals since 2015.

Phoenix has clinched around £9 billion worth, including the £3 billion takeover of Standard Life Aberdeen’s insurance business and £1.3 billion paid for divisions of Axa and Abbey Life. “We are what they would call in America a ‘category killer’,” said Phoenix chief executive Clive Bannister. “We are wholly specialised vehicle. In most industries the bigger you are, the more effective you are but our industry is one which rewards scale.”

Bannister, son of four-minute-mile runner Sir Roger Bannister, is retiring in March to be replaced by former Aviva man Andy Briggs. He said Briggs had been kept informed about the takeover.

Phoenix and ReAssure tried to merge in 2013 but the deal fell through. They competed on the £1.6 billion takeover of Guardian Financial Services in 2016 in a duel won by ReAssure.

Fenchurch and Morgan Stanley advised Swiss Re. Phoenix had BAML, Citi, HSBC and JPMorgan.