Cinven to Sell ‘Zombie’ Life Assurer


September 18, 2015


Private equity firm Cinven could be about to sell the life insurance group, Guardian Financial Services, to another UK insurer. Reports on Thursday confirmed Phoenix is exploring to possibility of an acquisition – the deal could potentially exceed £1 billion.


Cinven’s Decision to Sell


The private equity firm bought Guardian Financial Services in 2011 from the Dutch life assurer, Aegon. Cinven paid £275 million for the life assurer and the firm has since used Guardian as a platform for further buyouts.


Under Cinven, Guardian acquired Ark Life from Allied Irish Banks in 2013. The estimated value of the deal stood at €350 million. Furthermore, it also bought a number of units from Phoenix, the insurance group that is potentially buying Guardian. Phoenix sold around £1.7 billion worth of assets to Guardian in 2012 as part of an effort to reduce its debt levels.


Cinven was able to boost Guardian’s assets, which currently stand at around £20 billion. The private equity firm announced earlier this year it’s undergoing the dual-track process in preparation for an exit.


Phoenix Looking for a Deal
On Thursday, Phoenix announced its potential interest towards the insurer. The Financial Times reported the group told it is “evaluating Guardian Financial Services as part of an ongoing sale process for the…business”.


The deal would see the two life assurers join forces in a sector, which is currently going through a shakeup. The incoming Solvency II regime is causing concerns over capital requirements, which has resulted in heightened activity in the sector.


Both Phoenix and Guardian are so-called ‘zombie’ life assurers. They are specialised in historic life policies – both in terms of buying and administering – that are not available for new customers.


According to the reports, the potential deal could well see Phoenix pay over £1 billion to the private equity firm. Shore Capital analysts’ client note reportedly viewed the deal as “a transformational deal for Phoenix” and the note went on to state, “the issue is whether Cinven would accept the level of discount implied in the current rating of Phoenix”.


Consolidation Heating Up


The UK insurance sector is undergoing massive changes, as the government’s new pension policies are cutting the number of annuities being sold. This together with the European regulatory changes has meant the sector is facing increased consolidation.


This year has already seen Aviva acquiring Friends Life in a £5.6 billion deal. Furthermore, Zurich is close to acquiring its British rival RSA in another potential mega deal of £5.6 billion. The Express & Star reported Phoenix stating it’s currently “well positioned to take advantage of the consolidation opportunities in its sector”.


But the insurance group isn’t the only one after the ‘zombie’ life assurer. According to Sky News, the private equity could receive bids from fellow private equity firm CVC Capital Partners as well as Admin Re. In addition, it might well consider listing Guardian next year. Experts suggest the IPO could see the assurer valued at £2 billion. It remains to be seen what the private equity firm decides to do.

Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedIn