Posted on Oct 19, 2010 by Sergio Ulloa
Resolution Ltd is set to acquire Bupa's Health Assurance business in a £102 million (US$164 million:122 million Euros) deal.
As part of Resolution Ltd's strategy to build a substantial share of the UK life insurance market, the company has reached an agreement with Bupa to acquire its life, income and critical illness insurance business. This enhances the previous acquisitions by the Clive Cowdrey formed company - Resolution Ltd - and follows the purchase of Friends Provident in 2009 for £1.9 billion (US$3.04 billion:2.28 billion Euros), and the £2.75 billion (US$4.4 billion:3.3 billion Euros) acquisition of AXA's UK life assurance and savings arm earlier this year.
The £102 million (US$164 million:122 million Euros) acquisition of Bupa Health Assurance (BHA) by Resolution Ltd will be completed through the Resolution Ltd life subsidiary Friends Provident Life and Pensions Limited in a move to further expand the Resolution's UK Life Project and augment its share of the life protection business.
The deal by Resolution Ltd follows the largest deals completed by the insurance buyout specialist, with a £2.75 billion (US$ 4.4 billion:3.3 billion Euros) for the British branch of AXA in June of this year, and the £1.8 billion (US$ 2.9 billion:2.2 billion Euros) in 2009 for Friends Provident. Resolution Ltd. will be using its own capital in reserves to acquire the UK based Bupa Health Assurance.
Entrepreneur Clive Cowdery founded Resolution Ltd in 2008 as an investment platform in the UK life sector. The move for Bupa Health Assurance continues Resolution Ltd's further expansion of insurance products, creating access to Bupa's income, critical illness and life insurance range of products.
The acquisition will strengthen Resolution's market share for individual protection products and create another revenue stream for Friends Provident in the UK, and global market, for this sector of the insurance business. In addition to the deal, an agreement between Friends Provident and Bupa will enable the brands to work in partnership, with the ability to introduce each company's products through their respective distribution channels.
This acquisition will strengthen the Resolution Group's risk business product range and improve the profitability of the protection business, which it could sell along with the group's corporate pensions.
The decision by BUPA to sell BHA is part of the company's strategy to focus on the healthcare sector and UK health insurance products and services. The move by the Bupa Group follows a surplus of £428 million (US$ 657 million:513 million Euros) announced in June 2010, after a period of stagnation in the UK market.
Speaking about the decision, the Managing Director of Bupa Health & Wellbeing, Dr Natalie-Jane Macdonald, said: "We are proud of Bupa Individual Protection and Bupa Group Risk, which both have reputations for high-quality products and customer service. Our decision to sell is based on strategic fit. The sale will allow Bupa Individual Protection and Bupa Group Risk to benefit from belonging to a company with a strong focus on both protection and risk. Importantly, this decision also allows Bupa to concentrate on healthcare products and services"
BHA was established in 1994, and is a wholly owned subsidiary of Bupa, created to provide individual and group protection insurance, in addition to Bupa's primary business of private medical insurance in the UK market.
For the first half of 2010, Resolution's individual protection premiums produced a market share for AXA Sun Life of 6%, with the Friend Provident market share standing at 5%. In the same period, the BHA individual protection premiums were £11 million which represented a 3% market share.
In 2009, Bupa Health Assurance had a 24 percent increase in new business for their critical illness and income protection products. The deal is expected to be completed by the beginning of 2011, with Bupa Health Assurance becoming a stand-alone entity within the Friends Group in the meantime.
The Resolution Ltd's overall goal is to build a life insurer with an embedded value of £10 billion (US$ 16 billion:12 billion Euros) by 2013 and then to either sell or float the group on the stock market. The respective embedded values currently are estimated at £228 million (US$ 365 million:273 million Euros) for BHA and £6 billion (US$ 9.6 billion:1.2 billion Euros) for Resolution Ltd existing business.
In 2008, the UK insurance market was the biggest in Europe and the third biggest globally, which a total premium income of £215.3 billion (US$ 344 billion:258 billion Euros).
Final completion of the deal is subject to Financial Services Authority (FSA) and the Guernsey Financial Services Commission approval.
Insurance Companies Mentioned
Bupa was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
Resolution Operations LLP is a privately owned advisory and operating firm which provides services to Resolution Ltd. Resolution Operations LLP is part of the Resolution Group that also includes Resolution Capital Limited and Resolution Financial Markets LLP. Resolution Capital Limited facilitated the creation and initial public offering of Resolution Limited. Resolution Financial Markets LLP undertakes for Resolution Operations LLP a range of activities that include working with investors to facilitate the direct placing of equity and debt with institutions.
Friends Provident Group plc, a life and pensions company, was founded in 1832 and
was acquired by Resolution Limited in 2009. Friends Provident provides a range of financial products and services for individual customers, commercial businesses, and other institutions. Its protection products include life cover, critical illness cover, income protection and business protection.
AXA Group is a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA's operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.