Phoenix Group has confirmed it is in talks with private capital firms over a potential partnership to accelerate the growth of its UK pension risk transfer (PRT) business.
The insurer said it is in “initial discussions regarding a potential third-party partnership to accelerate the growth of its leading pension risk transfer business”. A spokesperson told IPE that talks are at an “early stage and there is no certainty that this will result in a transaction”.
It emerged earlier this week that Phoenix is exploring a third-party partnership to expand its PRT operations, reportedly in discussions with Blackstone, KKR and Sixth Street to raise more than £1bn.
The move would position Phoenix to capture further share in a fast-growing market for bulk annuities.
Market observers suggest Phoenix could pursue a similar model to the partnership between Legal & General (L&G) and Blackstone, which combined L&G’s PRT and asset management strengths – including a £92bn annuity book and £1.1trn in assets under management – with Blackstone’s $465bn credit platform.
Earlier this month, L&G completed the largest PRT deal of the year, a £4.6bn buy-in across two Ford Motor Company pension schemes.
Michael Abramson, partner at Hymans Robertson, described the L&G–Blackstone tie-up as “interesting” given L&G’s history of originating private credit internally, but noted that it expanded the insurer’s reach beyond the UK.
The UK’s PRT market has also seen a surge in overseas investor activity. In July, Pension Insurance Corporation (PIC) was acquired by Athora in a £5.7bn deal, while Just Group was bought by Brookfield Wealth Solutions for £2.4bn.
According to Abramson, stable and attractive returns continue to draw international capital. He said that a lot of overseas investors have been trying to find a way into the market “for quite a long time”, adding that reinsurance had been the most common route to date.
Brookfield, for instance, initially entered the market through funded reinsurance with Just Group before attempting to establish its own UK insurer, Bluemont, and ultimately acquiring Just Group outright.
Andrew Ward, head of risk transfer at Mercer, said the Prudential Regulation Authority had been “fairly proactive” in tightening oversight of funded reinsurance, aiming to ensure the standards of funded reinsurance enable the ability to get hands back on assets and don’t lead to a fundamental weakening of the insurers themselves.
Ward added that with regulatory scrutiny rising, “direct entry and stake in the market and playing directly can make sense”. He expects further interest from overseas investors as the UK defined benefit insurance and private markets continue to expand.
David Honour, head of insurance consulting at XPS, noted that the market is increasingly blurring the lines between insurance and asset management.
“Asset managers bring enhanced investment capabilities to insurers,” he said. “By the combination of the asset management capabilities and the insurer operating under a regulatory regime, that creates a more optimal structure for insurers to operate under and allows them to be more competitive in the market.”
Honour added that further consolidation is likely, driven by “natural synergy” between insurers’ long-dated liabilities and the long-term assets that asset managers can provide.
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