“It is still not certain how Aviva defines the large-scale Bulk Purchase Annuity market, but initial indications suggest they may continue to be active in the market for smaller transactions, perhaps up to £25m-£50m, although this remains to be seen.
“The majority of Aviva’s deals have been at the smaller end of the market and, as a result, the impact of its withdrawal from the large-scale Bulk Purchase Annuity market may be relatively limited. We expect to see some reduction in the number of providers interested in the larger deals, but this is an area of the market where the level of competition remains very healthy.
“We do not believe that this will have a major long-term impact on the market and on a positive note, we have this week seen Reinet announce a new investment of £400m in PIC (the specialist Bulk Purchase Annuity business), and we continue to see new providers showing an interest in entering the market. “
Background on Aviva’s involvement in the Bulk Purchase Annuity market:
As part of its comprehensive review of all business lines, Aviva announced today that it is reviewing its continued involvement in the large-scale Bulk Purchase Annuity (BPA) market in light of the low return on capital that the business generates relative to others. .
Over the last two years Aviva has been a reasonably significant player in the BPA market, with a 20% market share in 2010 and 2011 (£873m and £1,076m of new premium respectively), although this tailed off in the first quarter of 2012 (4% market share with £21m new premium). Aviva has, however, written a relatively small number of the high profile deals that have transacted, Meat & Livestock Commission (£150m) and Next (£124m) being the largest.
There should be no impact for existing policyholders.
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