May 27, 2016 / 7:47 AM / 3 years ago

UPDATE 2-French insurer AXA sells last UK life and savings business

* Phoenix to pay 375 mln pounds in cash

* Deal will add 12.3 bln pounds to Phoenix assets

* AXA to book 400 mln euro loss on three UK sales this year (Adds Phoenix CEO comments, advisers, background)

By Geert De Clercq and Esha Vaish

PARIS, May 27 (Reuters) - French insurer AXA is selling its UK investment and pensions business to Phoenix Group , completing a well-flagged exit from a mature life assurance market to focus on faster-growing emerging economies.

AXA completed a five-year strategic plan last year that helped it solidify its position as the second biggest insurer in Europe after Germany’s Allianz by turning more to countries in the developing world with low insurance coverage.

Following the sale, AXA will have raised 832 million euros ($930 million) from the disposal of its UK life and savings businesses this year, though it will book a 400 million euro loss on the transactions, it said on Friday.

AXA, which also announced a management reshuffle under its incoming chief executive on Friday, has previously sold its platform Elevate to Standard Life and offshore investment bonds business to Life Company Consolidation Group.

Phoenix, Britain’s largest owner of life assurance funds closed to new customers, said it would pay 375 million pounds ($549 million) in cash to close the deal, adding that it will add 12.3 billion pounds of assets under management and more than 910,000 policies.

After the acquisition, which will be Phoenix’s biggest deal since 2010, it will hold 59 billion pounds of life assets for about 5.4 million policyholders, it said.

AXA’s Sun Life, which sells life assurance to the over 50s, is the largest of the businesses Phoenix is buying.

Phoenix shares were up 3.8 percent at 881.50 pence at 1217 GMT, making it the top gainer in London’s FTSE midcap index , while AXA shares were 0.3 percent higher.

Phoenix Chief Executive Clive Bannister said the company would seek other deals in the short term.

“This is a sensible transaction which makes Phoenix both bigger and better and it acts as a stepping stone for additional transactions ... So a door that is already open, we’re making open even broader and open more widely,” he told Reuters.

The life insurance market is consolidating with some firms selling assets due to the increased costs of running life insurance businesses following the introduction this year of new European capital rules for insurers, known as Solvency II.

Earlier this week, Britain’s Legal & General Group said it would buy 3 billion pounds of annuity liabilities from Dutch insurer Aegon.

HSBC and JPMorgan advised Phoenix while Barclays and Fenchurch worked with the French insurer.

“The deal is part of Phoenix’s efforts to optimise their capital base by diversifying into more mortality risk,” said a source close to the deal.

For Phoenix, the deal is expected to generate cash flows of about 300 million pounds between 2016 and 2020, and 200 million pounds from 2021 onwards. Phoenix said it would boost its final 2016 dividend by 5 percent to 28 pence per share. ($1 = 0.6830 pounds) ($1 = 0.8945 euros) (Reporting by Geert De Clercq in Paris and Esha Vaish in Bengaluru; additional reporting by Pamela Barbaglia in London; editing by Ryan Woo and David Clarke)

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