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(Alliance News) - Shares in Phoenix Group Holdings PLC rose on Thursday on the prospect of a step-up in shareholder returns, as it announced a GBP248 million acquisition.
The London-based insurance services provider said it will acquire life insurer SLF of Canada UK, or Sun Life UK, for GBP248 million. It will purchase the unit from Sun Life Financial Inc.
The acquisition, which will be fully funded from existing cash resources, is expected to deliver around GBP470 million of incremental long-term revenue. Around 30% of this is expected within the first three years, Phoenix added.
At the end of December, Sun Life had around 480,000 in-force policies and approximately GBP10 billion assets under administration, of which GBP2.5 billion are annuities that will remain reinsured under Sun Life.
Phoenix also said that the acquisition of the Toronto-based company will enhance and diversify its capabilities in North America.
The deal supports a "2.5% inorganic dividend increase", effective from its final 2022 payout, the company added.
"In future years, we intend to simplify our dividend communications by announcing any dividend increase at the time of our full-year results, which will combine both organic and inorganic growth, rather than providing separate dividend guidance on announcement of future [mergers and acquisitions]," the firm said.
The acquisition, which is subject to regulatory approvals, is expected to be complete in the first quarter of 2023.
Chief Executive Officer Andy Briggs said: "The acquisition of Sun Life UK is highly attractive for Phoenix Group and demonstrates the significant value that smaller cash funded [mergers and acquisitions] transactions can deliver for our shareholders."
Phoenix shares were trading 1.9% higher at 665.40 pence each in London on Thursday morning.
By Sophie Rose; sophierose@alliancenews.com
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