Life insurance investor Phoenix (PHNX) has agreed to buy Deutsche Bank’s UK life business in a deal worth almost half its market cap.

Phoenix, which specialises in buying life insurance books closed to new business, will spend £935 million on Abbey Life Assurance.

This could prove a shrewd move by the group at a time when investment returns are typically depressed by low interest rates.

It adds £10 billion of assets spread across 735,000 assets to the £2.1 billion cap’s portfolio. Management intend to fund the deal through a £735 million rights issue and debt.

Phoenix estimates that the portfolio will generate £500 million of cash by 2020 and around £1.1 billion thereafter.

Phoenix Group Holdings  PHNX    Summary   Shares Magazine

This is Phoenix’s latest acquisition following its takeover of AXA Wealth’s pension and protection business for £375 million in May.

In 2017, Abbey Life will add £197 million to the dividend fund, or a 5% increase. This will help management lift dividends by 10% next year from the 26.7p a share recorded in 2015.

Shareholders vote on the deal at the end of October.

Investors welcomed the deal, sending the shares 3.2% higher to 866p.

There are risks to the deal, Abbey Life is one of several life insurers under investigation for alleged malpractice.

Selling this unit is expected to help Deutsche beef-up its balance sheet as questions over its financial health persist.


Issue Date: 28 Sep 2016