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Clive Bannister's forecast of 300 billion pounds of
opportunities in the broader life insurance market tops guidance
by insurance heavyweights, with Legal & General <LGEN.L> having
estimated the UK market to have 100 billion pounds of closed
annuities.
"We think there is inevitable further consolidation because the
old vertical model of insurance companies combined with asset
management companies is under threat, therefore we see a
separation," Bannister told Reuters.
Insurer and asset manager Standard Life's <SL.L> plans to merge
with Aberdeen Asset Management <ADN.L> in an 11 billion pound
deal have triggered speculation Standard Life may sell its
closed annuity book.
Insurer Prudential <PRU.L> has also stopped offering annuities
to new customers, and has a 33 billion pound book of closed
annuity business.
"There is vendor motivation in the terms of release of trapped
capital," Clive added, after Phoenix raised its long-term cash
generation target due to benefits of acquisitions made last
year.
In 2016, Phoenix bagged AXA's <AXAF.PA> UK investment and
pensions business as the French firm exited from a mature life
assurance market and Deutsche Bank's <DBKGn.DE> British
insurance business Abbey Life as the German firm sold off
assets.
However, the British insurer, which makes money by buying life
insurance portfolios that are closed to new customers and
running them more efficiently, lost out last year on buying
Guardian Financial Services, which was bought by reinsurer Swiss
Re <SRENH.VX> for about 1.6 billion pounds.
Chief Financial Officer Jim McConville told Reuters that the
company could consider purchases of a similar size to the
unsuccessful Guardian deal, for which they would seek financing.
Smaller deals could be funded from existing resources.
Bannister declined to comment specifically on Prudential and
Standard Life's annuity book, but said: "We are very comfortable
with annuities.... So yes, we are interested in a transaction in
the UK market."
Britain's vote to leave the European Union had increased
opportunities to buy assets, Bannister said, as foreign
companies reassessed the market after the August interest rate
cut, a drop in the sterling currency making dividends less
attractive and concerns over bond market volatility.
Thanks to its recent deals, Phoenix said it now expects to
generate 2.8 billion pounds ($3.5 billion) of cash from
operating companies between 2016 and 2020, up from an earlier
target of 2 billion pounds.
The company's shares were up 1.5 percent at 803 pence at 1037
GMT.
($1 = 0.8058 pounds)
(Reporting by Esha Vaish and Noor Zainab Hussain in Bengaluru,
Carolyn Cohn in London, additional reporting by Rahul B; Editing
by Amrutha Gayathri and Louise Heavens)
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