European private equity firm, Cinven, today announces that it has reached an agreement to acquire Guardian Financial Services ("Guardian" or "the Company"), the UK provider of life and pension products, from AEGON for an enterprise value of £275 million.
Guardian, established in 1821, is the collective trading name for Guardian Assurance plc, Guardian Linked Life Assurance Ltd and Guardian Pensions Management Ltd. Based in Lytham St Annes, Lancashire, Guardian has over 300,000 policies, approximately 170 employees and has been closed to new business for ten years. The Company is a wholly-owned subsidiary of AEGON, the international life insurance, pension and asset management company based in The Hague, Netherlands.
The acquisition of Guardian provides Cinven with an attractive entry point into the UK closed life market and a strong platform from which to execute a consolidation strategy for the sector. The fragmented nature of the life insurance market coupled with the ongoing pressure that the industry is facing is set to drive continued consolidation in the market. This is likely to be further enhanced by banking institutions looking to exit insurance assets and overseas insurers seeking to recycle capital. Through the acquisition of Guardian, Cinven is well placed to participate in this ongoing consolidation.
Closed life books represent attractive investment opportunities as they enjoy highly visible and robust long term cash flows, limited downside risks and attractive returns on equity. By further de-risking these books and implementing actuarial, operational and financial initiatives, Cinven can generate improved returns on capital and create value for both policyholders and shareholders. Through continued consolidation of books, incremental value can be achieved through operational and capital synergies.
Commenting on today's announcement, Caspar Berendsen, a Partner at Cinven, said:
"Cinven's Financial Services team has invested considerable time into developing its strategy for the closed life market and believes it represents an excellent investment opportunity with attractive returns. Guardian is an ideal entry point for us into the market and provides us with a strong platform from which to deploy further capital to create a leading closed life consolidator."
This is the third Financial Services investment originated by Cinven in its current fund, the first two being Partnership Assurance, the leading provider of enhanced annuities to UK retirees, and Avolon, a leading provider of aircraft lease finance.
The transaction is expected to close in the fourth quarter of 2011 and is subject to regulatory approval. Third party debt financing was provided by Lloyds TSB.