Phoenix eyes Ireland for more corporate pension scheme deals

Phoenix Group Holdings will seek to buy more European corporate pension schemes, its chief executive said on Thursday, after the firm completed its first major bulk annuity purchase earlier this year. This could include Irish schemes.

Phoenix, Britain’s largest owner of life assurance funds closed to new customers, finalised the £470 million deal with the trustees of the Marks & Spencer Pension Scheme in May.

Bulk annuities, which involve the transfer to an insurer of company defined benefit, or final salary, pension schemes, have become more popular, especially in Britain, as many schemes are in deficit and companies are seeking ways to offload the risk.

British bulk annuity sales hit record levels in the first half of the year, pensions consultants said this month. There are around £2 trillion in private sector pension liabilities in the country.

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The market for bulk annuity deals "provides growth for us and we have relevant transferable skills. So it is a natural [thing] for us to do," chief executive Clive Bannister said after the company announced first-half results.

Selective

He also said Phoenix would be selective, adding that the company looked at seven deals last year but closed only one.

Finance head Jim McConville said the company expected to spend between £50 million and £75 million a year and anticipated it would be funded from its own resources.

Mr Bannister said the deals would be very focused on Britain, the company's largest market, but that the company would "look positively" towards Germany and Ireland as well.

Phoenix, which bought the bulk of Standard Life Aberdeen’s insurance business for £3.24 billion in February, said it would no longer describe itself as purely a “closed” business but as a consolidator of both open and heritage life businesses.

Phoenix bought Standard Life Aberdeen’s ongoing Irish and German insurance businesses, as well as closed books of annuities, and the enlarged company is expected to have £240 billion of assets under management. Of this, about £160 billion would be closed, while £80 billion would be open.

Acquisition

Phoenix said it expected to complete its acquisition of Standard Life Assurance at the end of this month.

The company topped estimates for first-half operating profit in Thursday’s results and said it expected to generate more cash than originally targeted for 2017 and 2018.

Phoenix generated £349 million in the first half, above analysts’ expectation of £298 million, according to company-supplied consensus estimates.

It now expects to exceed its cash-generation target of £1 billion to £1.2 billion for 2017 and 2018, but maintained its forecast of £2.5 billion for 2018 to 2022.

– Reuters