Phoenix chief expects Covid-19 to speed up insurance M&A

The coronavirus crisis is set to speed up the pace of dealmaking in UK life insurance, according to Andy Briggs, Phoenix chief executive, as companies look to rid themselves of old businesses they no longer want.

Many insurers have large books of legacy products, consisting of long-term policies that were sold to customers years ago but no longer fit in with their plans. A number of specialists have been set up to buy these books and run them better by saving money.

Phoenix has been at the forefront of the trend. In 2018 it paid £3.2bn for Standard Life Aberdeen’s insurance business, while last month it completed the £3.2bn acquisition of ReAssure, one of its main rivals, from Swiss Re.

Mr Briggs, a former Friends Life and Aviva executive who joined Phoenix this year, said the crisis would prompt more deals.

“We are very optimistic about the potential outlook for further M&A in the UK . . . So many companies are struggling with their balance sheets, they’re struggling with their valuations, they’re struggling to pay dividends,” he said.

Phoenix is about to start integrating ReAssure, a process that will run into next year, but Mr Briggs said that would not stop the company from doing more deals.

“M&A remains a core central part of our strategy,” he said. “If the right deal came along at the right price we would be able to look at that . . . but we’re not pounding the streets morning, noon and night looking for the next deal right now because we’ve got a lot on the go already.”

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Phoenix’s main target is the UK, but Mr Briggs said the company may look for deals in Europe in the medium term.

He was speaking as Phoenix reported results for the first half of the year. Cash generation — one of the company’s preferred measures of profitability — rose 51 per cent to £433m, which was ahead of analysts’ expectations. Phoenix also increased its cash generation target for the year from a range of £800m-£900m to a range of £1.5bn-£1.6bn following the completion of the ReAssure deal.

Pre-tax profits rose from £217m to £611m, and the company declared a 23.4p per share first-half dividend, which was level with last year. Many of the UK’s insurers suspended their dividends earlier in the year because of the crisis, but Phoenix pressed ahead with its payout.

Phoenix shares rose 1 per cent on Thursday and are down 7 per cent in the year to date, against a 22 per cent decline in the FTSE 350 life insurance index.



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