Swiss Re releases capital by selling £437m Phoenix shares

Global reinsurance firm Swiss Re has released UK £437 million of capital by selling a chunk of its shareholding in the largest European pension and life consolidator Phoenix Group Holdings.

Swiss Re acquired the shares in Phoenix Group Holdings when it sold its ReAssure business to the company in 2019.

The reinsurance company took a shareholding in Phoenix of around 17% of its shares at the closing of that deal, as well as a cash injection of GB £1.2 billion from the sale.

Now though, Swiss Re said it has sold a roughly 6.6% stake in Phoenix for £437 million through an accelerated bookbuilding process.

The reinsurance firm said that was part of a “regular review and rebalancing of Swiss Re’s investment portfolio.”

Phoenix consented to Swiss Re selling these shares prior to the expiry on 23rd July 2021 of the lock-up arrangement agreed between the parties.

Swiss Re said that this share sale will drive a low single-digit increase in the Group’s Swiss Solvency Test ratio, an important capital measure for the reinsurance company.

The remaining roughly 6.6% stake in Phoenix that Swiss Re holds is still subject to a lock-up for another 90 days, Swiss Re said.

While not a significant uplift in solvency for Swiss Re, this is additional capital the reinsurance company can put to work in expanding its underwriting business further.

With rates still conducive to growth, both across its core reinsurance business as well as its commercial insurance operations at Corporate Solutions, for Swiss Re having the cash at this time is likely a better use of capital than keeping it locked up in shares.

Swiss Re has been expansive at recent renewals, we understand and this additional firepower may give the company the ability to continue to be so throughout the remainder of this year, capitalising on the rate environment and building a higher-returning portfolio of reinsurance and insurance business.

As Swiss Re’s holding in Phoenix has now fallen below 10%, the reinsurer relinquishes a seat on the board and its nominated representative, Christopher Minter, will resign from the Phoenix Board once the share sale is settled, which is expected to be on 25th June 2021.

Commenting on the Board change, Nicholas Lyons, Phoenix Chairman said, “On behalf of the Board, I would like to thank both Christopher for the significant contribution he has made since joining the Board in July 2020 and Swiss Re for its support during its time as a significant strategic shareholder.”

Phoenix also said that MS&AD Holdings, which was a stakeholder in ReAssure and so received a roughly 14.5% shareholding in Phoenix after that sale is, “committed to its strategic relationship with Phoenix and expects to remain a significant shareholder.”