By Scott Wright

THE financial services heavyweight that owns Standard Life has continued its rise with the acquisition of Sun Life UK – and underlined its appetite for further deals.

Phoenix Group, which acquired the life and pension business of Standard Life for £3.2 billion in 2018, has bought the closed book UK life insurance company from Sun Life Financial in a cash deal worth £248 million.

The company, which employs around 2,800 people at its Standard Life operation in Edinburgh, said it expects the deal to deliver around £470 million in long-term cash generation, around 30 per cent of which is expected to emerge in the first three years. And it is targeting around £125m of cost and capital integration synergies, net of costs – highlighting that this represents around 50% of the value of the sum paid for the business.

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Phoenix, which built its name as a consolidator of closed pension books, said Sun Life UK represents around £10bn of the estimated £480bn UK heritage M&A (mergers and acquisitions) market.

It noted that the Sun Life deal was the first acquisition that it has financed solely from its existing cash resources, while emphasising that it retains the firepower to capitalise on further opportunities, at the same time as maintaining its balance sheet strength.

Phoenix said the value and cash flow generated by the Sun Life deal will support a 2.5% inorganic rise in the group’s dividend, which would take effect from and include the 2022 final dividend, subject to the deal being completed.

Andy Briggs, chief executive of Phoenix Group, said: “The acquisition of Sun Life UK is highly attractive for Phoenix Group and demonstrates the significant value that smaller cash-funded M&A transactions can deliver for our shareholders.

“We expect this acquisition to deliver incremental long-term cash generation of around £470m, inclusive of cost and capital synergies. This supports a 2.5% dividend increase, in line with our ambition to sustainably grow our dividend over time.”

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Sun Life UK operates a life company, Sun Life Assurance Company of Canada (UK), a closed book with life, pensions and annuity business.

At December 31, 2021, it had around 480,000 in-force policies and circa £10bn of assets under administration, about £2.5bn of which are annuities that will remain insured with Sun Life.

The company employs around 70 people in Basingstoke.

London-based Phoenix emphasised that it was keen to pursue more deals further to the Sun Life UK acquisition.

“Such additions to our heritage business can deliver significant shareholder value by leveraging our market-leading expertise in delivering accretive M&A and realising integration synergies,” it said in a statement. “The board continues to see M&A as a strategic priority going forward and a core part of the group’s growth strategy.”

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Phoenix Group has around 13 million customers, around four million of whom are on Standard Life books, and has about £310bn of assets under management.

While it forged its reputation as a consolidator of closed books, the acquisition of Standard Life has positioned Phoenix for growth in the so-called open market. When Phoenix reported its annual results in March, the company underlined its commitment to invest in the Edinburgh-based pensions and long-term savings business, which it sees as a key driver of growth.

In July, the company cut around 50 customer service jobs in Edinburgh as roles were outsourced to digital company Mumbai-based TCS Diligenta.

The majority of Sun Life’s policy administration is outsourced to TCS Diligenta, which Phoenix said “supports a simplified operational integration programme”.

Mr Briggs added yesterday: “We welcome the colleagues who will join us from Sun Life UK, and as the UK’s largest long-term savings and retirement business with a strong track record of closed book integrations, we look forward to offering a safe home for Sun Life UK’s range of Standard Life products in our open division.”

Shares in Phoenix Group closed up 12.6p, or 1.93%, at 665.4p.