Entrepreneur Clive Cowdery has
moved to exploit consolidation opportunities in the UK’s life
market, announcing his Resolution Group is to acquire the bulk of
French insurer Axa’s UK life operations. The deal covers Axa’s
traditional life and pensions, independent financial adviser,
corporate pension and annuity businesses.
Excluded from the deal are Axa’s UK wealth
management operations comprising the Elevate wrap platform,
Architas Multi-Manager, Axa Wealth International, Axa Winterthur
Wealth specialist operations and Axa Direct Protection.
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Businesses included in the deal represent 41%
of Axa’s total UK life annual premium income, 69% of total UK Life
new business value in 2009 and about £40bn ($61bn) in assets under
management.
Total consideration for the acquisition is
£2.75bn, of which £2.251bn is in cash and £500m in Resolution 6.5%
senior deferred notes repayable over eight years.
The face value of the notes, and hence the
consideration, may be reduced by up to £150m depending on the
amount of surplus assets in Axa Sun Life’s with profits fund as at
31 December 2010.
Axa does not anticipate that any adjustment
will be required.
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By GlobalDataEstablished by Cowdery in 2008, Resolution’s
first major move came in August 2009 with the acquisition of UK
life insurer Friends Provident for £1.86bn. As the platform for
Resolution’s acquisitive expansion goals, Friends Provident will
absorb Axa UK’s units which encompass some 3.2m policies under Sun
Life, Axa, Equity & Law, Winterthur Life, Lifetime Care and
Provident Life brands. Some 2,200 Axa UK employees out of a total
of about 5,000 will also transfer to Friends Provident.
“The landmark deal combines two major players
in the UK life and pensions market, both of which have a rich
heritage. There is a good operational fit between both
organisations,” said Friends Provident CEO Trevor Matthews.
‘Substantial offering’
“Bringing them together will make us one
of the market leaders in our core businesses of protection and
corporate pensions in the UK. This combined group will have a
substantial offering in protection and corporate pensions products,
and a real opportunity to deliver cost efficiencies allowing us to
compete more effectively.”
Friends Provident reported annualised premium
income (APE) of £873m in 2009. To be acquired from Axa UK are
businesses that in 2009 recorded APE of £496m, a new business
margin (NBM) of 5% and net outflows of £1.82bn.
Axa UK CEO Nicolas Moreau termed it a
“significant step” in Axa UK’s strategy to increase its focus on
wealth management business, general insurance, health care and its
independent distribution unit Bluefin. Businesses to be retained by
Axa UK recorded APE of £344m and an 18% NBM in 2009.
Axa Wealth CEO Mike Kellard said: “Our
priorities are to rapidly grow the asset base of our wrap platform
Elevate and our multi-manager, Architas, as well as our specialist
pensions business Axa Winterthur.”
Business to be retained by Axa UK recorded APE
of £344m and an 18% NBV.
The total consideration to be paid for Axa UK’s
businesses represents 0.86 times the embedded value (EV) of the
sold businesses at the end of 2009 adjusted for the repurchase of
Axa Asia Pacific Holdings shares valued at €900m ($1.1bn) held by
Axa Life UK. After the buy-back net cash proceeds for Axa Group
will be €1.7bn.
However, Axa Group will take an exceptional
capital loss of about €1.4bn to be accounted for in net income in
2010, while its EV which stood at €30.4bn at the end of 2009 will
be reduced by about €500m. The businesses sold by Axa UK had an EV
of €3.6bn at the end of 2009 while those being retained had an EV
of €374m.
Following integration of the two businesses,
which is expected to occur in early-2011, Friends Provident is to
be renamed Friends Life.
