Savings and retirement provider Phoenix Group is to acquire closed-book UK life insurer Sun Life UK in a deal worth £248m.

The deal will be funded from existing cash resources.

The acquisition is subject to regulatory approvals and expected to complete in the first quarter of next year.

At 31 December 2021, Sun Life UK had 480,000 in-force policies and £10bn of assets under administration, of which £2.5bn are annuities that will remain reinsured with Sun Life.

As part of the deal the savings and retirement provider has agreed a long-term strategic asset management partnership with the Sun Life group to enhance its presence in North America.

Sun Life UK currently operates a predominantly outsourced business model, with the majority of policy admin outsourced. Phoenix said that this will allow them to deliver around £125m of integration synergies, net of costs, from cost efficiencies and capital management.

Phoenix said the acquisition is expected to deliver around £470m in long-term cash generation, with approximately 30% of this to occur in the first three years.

The acquisition is one of several made over the past two years by Phoenix, but the first to be financed solely from existing cash resources.

Standard Life Aberdeen sold its Standard Life brand to Phoenix Group in February 2021 as part of a branding review of all its businesses.

Andy Briggs, CEO of Phoenix Group, said: “The acquisition of Sun Life UK is highly attractive for Phoenix Group and demonstrates the significant value that smaller cash funded M&A transactions can deliver for our shareholders. We expect this acquisition to deliver incremental long-term cash generation of around £470 million, inclusive of cost and capital synergies. This supports a 2.5% dividend increase, in line with our ambition to sustainably grow our dividend over time.

“We welcome the colleagues who will join us from Sun Life UK, and as the UK’s largest long-term savings and retirement business with a strong track record of closed book integrations, we look forward to offering a safe home for Sun Life UK’s customers over the long term. I am pleased that we will also be able to offer Sun Life UK’s customers access to our broad range of Standard Life products in our open division.”

Phoenix sees M&A as a strategic priority and the savings and retirement provider said it continues to look for further acquisitions.

It also proposed a 2.5% increase to its final dividend as a result of the Sun Life deal, subject to completion.

Phoenix said this “demonstrates the significant value to shareholders of smaller, cash funded M&A”.

Phoenix rebranded its visual identity earlier this year to reflect its more consumer-led brand.

The provider said its “new and modern visual identity” would provide the foundation for stronger brand engagement. 

The Phoenix Group has evolved from a traditional closed-book consolidator to a company with growing consumer brands.

Phoenix claims to be the UK’s largest long-term savings and retirement business, with £300bn of assets under administration and around 13m customers.