European private equity firm Cinven today announces that it has agreed to sell Guardian Financial Services ('Guardian' or 'the Group'), the UK life insurance consolidation business, to Admin Re®, Swiss Re's unit active in the closed life book business, for a total consideration of £1.6 billion.
Under Cinven's ownership, Guardian has become one of the most active life insurance consolidators in the UK and Irish markets and the UK's largest privately owned life insurance company. Today Guardian has £20 billion of assets under management and manages 900,000 policies.
Cinven's Financial Services team identified closed life books as an attractive consolidation opportunity in 2010 and Guardian as a highly attractive entry point for a UK life insurance consolidation platform.
Cinven acquired Guardian in November 2011 from Aegon, the international provider of life insurance, pensions and asset management. It was the sole private equity firm invited to make a final offer for the business based on a combination of its strong sector expertise and strong relationship with the seller in the Netherlands.
Guardian has grown significantly since 2011 reflecting Cinven's well-executed acquisition strategy. Key achievements include:
A highly successful 'buy and build' consolidation strategy: Four successful acquisitions completed including Guardian and the following add-on acquisitions:
- 300,000 in-payment annuities, representing c.£4.9 billion of reserves, from Phoenix Group ('Phoenix'), the listed UK life assurance company (July 2012);
- Ark Life representing an incremental c.270,000 policies and £3.5 billion of assets from Allied Irish Bank (December 2013); and
- £1.7 billion of pension annuities-in-payment from Phoenix (July 2014)
Strong financial performance: Guardian's underlying UK Group net profit has increased by 285% to £104 million in 2014 from £27 million in 2010. Guardian's market consistent embedded value ('MCEV')i has increased by 540% to £2.7 billion from £0.4 billion, over the same period;
Creating an industry leading management team: Cinven appointed a new senior executive management team individually with a proven track record of successfully executing closed life strategies and creating shareholder value; and
Significant investment and operational improvements: These include de-risking of Guardian Assurance With-Profits fund and significant investment in improved operational and IT capabilities.
Caspar Berendsen, Partner at Cinven, said:
"The Cinven Financial Services team identified the consolidation opportunity for closed life books in the UK in 2010, driven by the fragmented nature of the life assurance industry, the ongoing pressure on new business volumes, regulatory change, and banks' and international insurers' desire to sell insurance assets or recycle capital.
"The investment in Guardian has been a highly successful one for Cinven given our ability to drive considerable growth through our 'buy and build' strategy with the completion of four acquisitions. We have had the pleasure of working with a highly capable senior management team at Guardian to achieve this great result and we would like to wish them every success in the future."
Rory Neeson, Senior Principal at Cinven, added:
"We are confident that Admin Re is a good next owner of Guardian as it has the resources and strategic desire to continue investing in the business for further growth.
"We believe the European life assurance market will continue to create opportunities for further consolidation in the near to medium term. Cinven will continue to capitalise on this in other markets, for example through its investment in Heidelberger Leben, the German life insurance consolidator, which Cinven acquired in April 2014 and is continuing to grow through further acquisitions."
Ian Owen, Executive Chairman of Guardian, added:
"Guardian's impressive performance is testament to the hard work of its management team and staff and the support and vision of our shareholder, Cinven. Throughout Cinven's ownership, I have been impressed with the team's understanding of the financial services market, especially given the complex regulatory environment, and their ability to identify and execute highly value-accretive acquisitions."
Completion of the transaction is subject to standard regulatory and competition authority clearances.
The sale of Guardian follows the successful realisations of Cinven's Financial Services businesses Avolon, the aircraft leasing business, via a NYSE IPO in December 2014 and subsequent sale to Bohai Leasing announced in September 2015; and the IPO of Partnership Assurance on the London Stock Exchange in June 2013. Cinven will retain a 20.5% shareholding in Partnership following the completion of its merger with Just Retirement.
(i) Market Consistent Embedded Value ('MCEV') is a life insurance term which is the sum of the present value of future profits plus adjusted net asset value