Life insurer Phoenix eyes deals to bulk up post Brexit

By Esha Vaish and Noor Zainab Hussain

(Reuters) - Phoenix Group Holdings, Britain's largest owner of life assurance funds closed to new customers, is scouting for acquisitions to help gain scale in a challenging, low interest rate environment after Brexit, its chief executive said.

Regulatory changes and rock bottom interest rates had ramped up pressure on industry players to deal with their legacy books, leading many to consider putting them up for sale, CEO Clive Bannister told Reuters on Thursday.

The interest rate cut that followed Britain's vote to leave the European Union has squeezed returns on investments for companies that manage closed life insurers.

"As the UK's largest closed life consolidator you would be surprised if we didn't engage in a wide range of discussions with multiple parties," Bannister said.

Phoenix is particularly interested in buying profit-making UK businesses, he added.

Bannister, who said in March that Phoenix wasn't dependant on deals for meeting financial targets for the next five years, said acquisitions would help realise savings by managing a larger number of policies more efficiently.

Phoenix is one among the companies that have made it to the final stages of an auction for the sale of Deutsche Bank's British insurer Abbey Life Assurance Co, Reuters reported in June, citing sources.

However, Bannister declined to comment on the auction process.

Phoenix's finance director, Jim McConville, said some customers were showing interest in keeping money in its products for longer.

McConville's comment comes at a time when market uncertainty could slash withdrawal rates from retirement pension schemes as customers seek to hold on to these guarantee-backed products for longer.

This weighed on Phoenix's Solvency II surplus, which at 1.1 billion pounds ($1.46 billion) as at June 30, came in slightly below analysts' expectations of 1.16 billion pounds, according to a company-compiled consensus. It stood at 1.3 billion pounds on Dec. 31, 2015.

Phoenix's surplus took a 300 million pound hit from Brexit, which has lowered interest rates and altered customer behaviour.

The company's results "carried the scars of the Brexit- induced volatility in financial markets towards the end of June," Shore Capital analyst Eamonn Flanagan wrote in a note.

The company said the purchase of French insurer AXA's UK investment and pensions business - which will add more than 910,000 policies - was on track to complete in the fourth quarter.

Phoenix also said it would move its Cayman Island-registered holding company to the UK.

(Reporting by Esha Vaish and Noor Zainab Hussain in Bengaluru; Additional reporting by Carolyn Cohn in London; Editing by Sunil Nair and Amrutha Gayathri)