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No more deals in foreseeable future, says Phoenix Group CEO

Phoenix Group Holdings PLC will not be buying any more business "for the foreseeable future" following its planned purchase of Swiss Re AG's U.K.-based closed life acquisition business, ReAssure Group PLC, CEO Clive Bannister told analysts Dec. 6.

Phoenix expects the deal to boost its dividend by 3% to 48.2 pence a share from the 2020 final dividend, compared to the 46.8 pence a share it expects to pay in respect of 2019, and so faced questions from analysts on a conference call discussing the ReAssure purchase as where the next transaction might come from.

Bannister told analysts that "we have a lot to do in our own family." For example, ReAssure continues to integrate the mature savings business it bought from Legal & General, and the more recent purchase of Quilter PLC's closed life business, announced in August.

He said Phoenix's acquisitions typically happen every year or every 18 months, but that it was "too futuristic" to say when to expect the next.

But he made it clear that more deals would come, and hinted at the possibility of future transactions outside the U.K. Bannister described the ReAssure transaction as a "massive vindication of what this company has believed in for the last decade and the journey of our industry," and he added, "I completely believe that any vendor will come and have a conversation with us."

He added that price and the certainty and speed of deal execution "are attributes that we will bring to a market which will continue to consolidate."

Europe opportunity

Phoenix estimates that there is £580 billion of closed life business across the U.K., Ireland and Germany, with 70% of that number in the U.K. Although he expects that the largest amount of consolidation will be in the U.K., Bannister said: "We believe that the consolidation that has taken place in the last 20 years in the U.K. is going to take place in Europe."

He pointed to the sale of Dutch insurer Vivat to NN Group and Athora, and the activities of German life consolidator Viridium as examples that the trend had begun.

"In a low-interest-rate environment, it becomes less and less compelling for some of the incumbents to own heritage businesses in the continent of Europe," he said. As a result, Bannister said, Phoenix's operations in Ireland and Germany "are not for sale, period."

He noted that it was unclear when, "if ever," these units might make an acquisition, but that they contributed more than enough to cover their cost of capital and so would be retained "for reasons of strategic optionality."

"That does not mean we are about to get our European passports and start traveling abroad," he added.

Although Bannister described the ReAssure acquisition as a "logical, intelligent deal," shareholders seemed less excited — Phoenix's shares closed up 0.24% in Dec. 6 trading.

But for Swiss Re, ReAssure's current majority shareholder, the picture is different. Its shares closed up 3%, with the announced sale coming five months after the company abandoned plans to float ReAssure, citing weak demand from large institutional investors in the U.K. primary market. The dropped IPO was one of the reasons Swiss Re gave for canceling the second tranche of its share buyback.