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Phoenix Group is in talks to raise more than £1bn from private capital firms as it seeks to expand its pension-risk transfer business and win a bigger share of an increasingly competitive and lucrative part of the insurance market.
The UK’s largest savings and retirement business had held talks with firms including Blackstone, Sixth Street and KKR about a possible deal that would enable it to bid for more and larger buyouts of pension pots, according to people familiar with the matter.
A final transaction could lead to Phoenix partnering with an asset manager to source and manage some assets, the people added. The new funds will allow the insurer to compete for more pension liabilities and the assets backing them.
The potential deal comes as Phoenix has been undertaking a strategic shift to manage more annuity-backed assets internally, while building up its team managing listed and private investments. Last month, it said it would pull £20bn from Aberdeen Group to manage in house.
Phoenix confirmed it was in initial talks over “a potential third-party partnership to accelerate the growth” of its PRT business. It added that talks were at an early stage and there was no certainty of an agreement.
The FTSE 100 pensions provider has been seeking to bulk up in the UK’s pension buyout market. It had also sought to acquire billions of pounds of pension liabilities from Ford in a £4.6bn deal that was ultimately won by rival Legal & General this week.
The UK’s PRT market, in which companies pay insurers to take on their financial obligations to retirees, has also attracted private capital groups including Brookfield and Apollo. In July, Apollo-backed insurer Athora struck a £5.7bn deal to acquire the Pension Insurance Corporation.
The fundraising aims to give Phoenix more firepower to originate private credit and infrastructure — particularly in North America — and package those assets so that they meet solvency rules for UK insurers, according to people familiar with the deal.
It could also give Phoenix more of an edge as it bids for larger pension pots, a segment of the market that has been dominated by L&G, PIC and Rothesay, the insurer founded by Goldman Sachs.
Phoenix’s Standard Life completed its largest transaction to date in August, a £1.9bn buy-in for members of Marsh McLennan’s UK pension fund.
UK companies were expected to offload more than £40bn in pension obligations this year, according to specialist consultancy LCP.
Blackstone, KKR and Sixth Street declined to comment.