Deutsche Bank’s UK lending unit, Abbey Life, have announced they are in discussions with leading life insurance firm Phoenix Group Holdings regarding a possible sale of their British operations, according to sources that prefer to remain un-named.
The sources claim the talks are in the closing stages and the purchase will cost Phoenix over a billion dollars, assuming both boards green-light the agreement.
Deutsche purchased Abbey Life a decade ago for well over the asking price and the current valuation for the business is roughly a billion pounds, said the sources in a magazine article for Reuters. The embedded value is close to double that if past figures are to be taken seriously.
“Phoenix could be bursting onto the closed life acquisition scene with this deal,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a note to investors. “The insurance sector is watching this one closely and if it proceeds we could see much more action in the UK.”
According to people close to the deal, Deutsche shunned offers from Admin Re and Legal & General last year in preference to entering into talks with Phoenix in 2016.
Phoenix and Deutsche Bank have both declined to answer emails and phone calls regarding the matter.
Earlier in the year Abbey Life was rocked by a scandal involving the treatment of long-term clients which is thought to be heading for compensation settlements and possibly hefty fines for the company.
Big insurers have come under increasing pressure from shareholders to settle their legacy books as new regulations and ultra-low interest rates hurt profits. Many players in the sector have resorted to putting their books up on the market.
Britain’s vote to leave the E.U. started the ball rolling on interest rate cuts and managers of closed life insurers have been one of the hardest hit in the financial landscape, with much reduced income.
Phoenix made it clear in their own announcement that the company will continue to seek out future opportunities to “take strides in the UK life insurance sector.” Chief executive Clive Bannister said that the firm was “actively searching for new acquisitions to become more competitive in the market.”
In the summer, Phoenix purchased French firm AXA's UK financial unit in a deal thought to be worth upwards of $500 million, encompassing all their pensions and investment business in Britain.
