Axa has agreed to sell its British investment, pensions and protection businesses, Axa Wealth and SunLife, to Phoenix Group as it retreats from the UK insurance market.
Phoenix Group today (27 May) announced its subsidiary, Pearl Life, has entered into a conditional agreement with Axa to buy the Axa Wealth and Sun Life business, adding an extra £12.3bn of assets to its book and 910,000 policies.
The group said it will pay a consideration of £375m when the transaction is complete, funded by an equity placing and a short-term debt facility which Phoenix expects to be paid off in six months.
Earlier this month, the French insurer revealed Standard Life had agreed to purchase its platform Axa Elevate.
Clive Bannister, Phoenix Group chief executive, said the acquisition marks an “important step forward” in Phoenix’s growth strategy, and will generate additional cash for the business.
Phoenix also proposes a 5 per cent increase in its final 2016 dividend, hitting 28p. This would boost the dividend per share to 56p on a yearly basis, which Mr Bannister said was a “sustainable level” to rebase the dividend going forward.
“We will invest heavily to ensure a smooth transition of the two businesses from Axa to Phoenix,” he said, describing the two companies as a “strong fit”.
“We believe there will be further consolidation in the UK life industry and we will continue to explore further opportunities as they arise.”
The acquisition is expected to generate cashflows of £0.3bn in the next four years.
Tony Catt, compliance office at Anthony Catt Limited, said: “I am surprised that Axa seems to be getting out of the UK market altogether. Presumably, their management see other markets being more profitable.
“Phoenix has tended to buy businesses almost on a ‘run-off’ basis. Simply administering as business comes to maturity or paying out as people move their money out, which is probably not good news for Axa clients.
“However, if Pearl Life starts to operate as an active business, that may be more positive for Axa clients.”