Phoenix Plots Bid For Deutsche Bank UK Unit

Phoenix (LSE: PHNX.L - news) , the 'zombie' life insurance group, is preparing to launch a takeover bid for Abbey Life that would accelerate industry consolidation amid sweeping regulatory changes.

Sky News has learnt that in recent days, Phoenix has hired investment bankers to advise on a bid for Abbey Life, which is owned by the troubled German lender Deutsche Bank (LSE: 0H7D.L - news) .

Abbey Life has been reported to be worth as much as £3bn, although sources close to Phoenix insist its price tag is likely to be worth little more than a third of that sum.

Deutsche has been considering a sale of its UK insurance unit for several months as part of a broader plan to offload non-core businesses and strengthen its balance sheet.

The German company has begun contacting potential buyers of Abbey Life, including other insurers and private equity firms, in the last couple of weeks, City sources said on Thursday.

The timing of the potential sale process is notable because Abbey Life was named by City regulators this month among six companies facing full enforcement probes over their treatment of long-standing policy-holders.

Phoenix's move to hire bankers to work on a bid underlines its determination to participate in the auction after it missed out on buying Guardian Financial Services, another competitor, last year.

Admin Re, part of Swiss Re (LSE: 0QL6.L - news) , bought Guardian, and is also tipped by analysts to be interested in Abbey Life.

Deutsche signalled in recently published financial results that it was considering a range of options for the future of Abbey Life, which closed to new business in 2000 and had around £12bn in closed life policyholder assets when Deutsche bought it from Lloyds TSB in 2007.

Abbey Life includes books of business from companies including London and Edinburgh Life, Excess Life, Target Life and Hill Samuel Life.

Clive Bannister, Phoenix's chief executive and son of the legendary four-minute mile runner Sir Roger, indicated last autumn that he would be interested in talking to Deutsche about making an offer for Abbey Life.

Although Deutsche insists it has not made a final decision about whether to sell Abbey Life, the scale of the challenges confronting John Cryan, the bank's chief executive, make a disposal almost inevitable.

Mr Cryan said this week that it was unclear whether the bank would again be loss-making in 2016.

Phoenix, which has a market value of exactly £2bn, has rebuilt its balance sheet, gaining an investment grade credit rating from Fitch Ratings last year.

Further consolidation of the closed life assurance sector has been anticipated since key decisions about a new regulatory regime called Solvency-II were made several weeks ago.

A Phoenix spokesman declined to comment.