Driving operational change
We worked with management to optimise its operations, and refocused the business on separating its asset, liability and risk management functions to improve returns and management of risk.
At the time of our ownership, Phoenix Group (“Phoenix”, formerly Pearl Group) was a closed life assurance fund consolidator that specialised in the management and acquisition of closed life and pension funds, operating primarily in the UK. The policies offered by these funds included unit-linked policies, with-profit policies and annuities.
Phoenix Group managed approximately £69 billion of assets for over five million policyholders which, at the time, made it the largest UK consolidator of closed life assurance funds.
TDR believed that the acquisition of closed book life assurance and pension scheme provided an opportunity to acquire funds which provided stable and predictable cash flows where such cash flows were less sensitive to external volatility than generally perceived. Furthermore we felt that many “closed” funds were being undervalued both by the application of an unduly high discount rate and as a result of negative market sentiment partially driven by industry wide mis-selling issues.
As a result, TDR and Sun Capital Partners, acting through Life Company Investor Group, purchased the closed life insurance businesses of HHG plc in April 2005.
What we did
Once TDR acquired Phoenix Group, we worked on optimising its operations and were able to realise significant savings. As part of this, the majority of the functions of the service company e.g. customer call centres and payment processing, were outsourced. We also created separate asset, liability and risk management functions to improve returns and risk management of the underlying portfolio, including hiring an experienced head of risk management, a CIO, several quantitative analysts and a high-calibre investment team.
In 2007 an opportunity arose to acquire Resolution plc, Phoenix’s principal competitor and a FTSE 100 company. We believed that this acquisition represented an opportunity to create further value through consolidation in the industry and through the application of similar techniques to those applied following the original acquisition of Phoenix.
How we exited
Subsequent to the reverse takeover of Euronext-listed Liberty Acquisitions Holdings (International) Company in 2009, the company sought shareholder approval for a Premium Listing on the London Stock Exchange. Phoenix was included in the FTSE 250 index with effect from September 2010.
We sold our shares in the business over the following years, and fully realised the business in July 2014, resulting in a gross multiple of 2.0x and a gross IRR of 27%.
Date of investment: April 2005
Deal type: Private sale
Exit date: July 2014
Exit route: Public shareholders