Sun and TDR in insurance buyout

Buyouts of insurance companies are still a fairly new concept, but financing of the new HHG deal should be helped by the successful conclusion of the Saga debt syndication.

Sun Capital Partners and TDR Capital will acquire HHG’s life insurance business for a cash consideration of £1.025bn. The acquisition will be facilitated through Life Company Investor Group, a UK-based company established to make long-term investments in the closed life fund sector.

The two firms have been looking at investment in the area for some time, although the industry has experienced a downturn in the last few years. Over 60 UK life insurance companies have stopped selling policies in the last two years due to a slump in share prices that made investments unprofitable.

UK entrepreneur Hugh Osmond formed Sun Capital Partners in 2001, with the life industry as a particular focus. TDR Capital is a private equity fund manager, whose investor base is made up mainly of UK and US pension Funds. It is led by Manjit Dale, formerly of DB Capital Partners.

The existing management team will continue in place, with the addition of representatives from the buyout firms and John Reeve as chairman and Ashok Gupta. Reeve was formerly Sun Life Assurance managing director.

Under the terms of the deal, HHG will return £875m to investors in return for cancellation of stock. AMP, Australia’s largest insurer, spun off HHG last year to focus on local businesses. Upon completion, HHG will comprise Henderson Global Investors and Towry Law, and will be renamed Henderson Group plc.

The agreement also brings HHG revised investment management agreements with Henderson Global for the next 10 years. Additionally, the deal removes group exposure to the UK life insurance sector and its related regulatory, solvency, mortality, and surrender risks.