Swiss Re to buy Guardian Financial Services for £1.6 bn

The Swiss firm, which is headquartered in Zurich, said its Admin Re division will buy Guardian to bolster its position in Britain as a consolidator of life funds that are closed to new business.

Guardian manages pensions, savings and protection policies for more than 900,000 policyholders across the United Kingdom and Ireland.

David Cole, Swiss Re’s Group CFO, added; “This acquisition is in line with Admin Re®’s strategic goals as well as with our multi-year financial planning”.

Admin Re is expected to generate around $1.7 billion of gross cash, including capital synergies, over the first three years, said Swiss Re.

The purchase is subject to regulatory approval and may be completed early next year, Swiss Re said in a statement Wednesday. This will bring the policy count of Admin Re’s United Kingdom business to more than four million.

“This is a large size deal for them”, Ming Zhu, an analyst at Canaccord Genuity, said by phone. In addition, the assets under management of the Swiss Re Group will increase by 12.5 billion pounds, or approximately 15%. Phoenix’s Chief Executive Officer Cliver Bannister and other firms including Royal London Group have said they expect to see similar businesses be put up for sale as the new capital rules, known as Solvency II, come into effect in January.

Under Swiss Re’s proprietary economic value management or EVM framework, the acquisition is expected to result in an EVM loss of approximately $0.9 billion at inception. It is however expected to generate a positive contribution to EVM economic net worth over time, supporting Swiss Re’s focus on long-term value generation.

Its finance chief told Reuters this month that the group does not plan major acquisitions in its main business of property-casualty reinsurance and will likely stand aside as a consolidation wave grips the sector. In fact the asset boost could be significant and this deal may prove to be as much about the float as the policies (on a profit basis).