Rothesay Life has announced that it has entered into bulk annuity transactions with two pension plans of Smith & Nephew, the FTSE100 medical technology business.
Transaction highlights:
- The transactions are with the Trustees of the Smith & Nephew UK Pension Fund and the Smith & Nephew UK Executive Scheme, covering £190m of pension liabilities in total.
- Both transactions involved an exchange of UK gilts for a bulk annuity insurance policy that provides close matching to the Trustees’ chosen portion of their liabilities.
- The transaction gives Smith & Nephew secure, low risk assets and additional protections, such as cover against longevity risk and pension increase risk
- The policies are being held as investments by the Trustees and the administration and payment of members’ benefits are unaffected by these transactions
The combined transaction is a further example of large pension schemes executing mid-market transactions (£100m to £500m) in order to insure a portion of their liabilities, an area in which Rothesay Life has a key focus. Rothesay Life wrote over £1 billion of new bulk annuity business in 2012 and reports a strong pipeline of opportunities, which are expected to produce a flow of new business in 2013 to underpin its appetite for larger, more bespoke transactions. The Trustees were advised by LCP who led negotiations with insurers. The Company was advised by KPMG.
Addy Loudiadis, CEO, Rothesay Life, said: “This transaction illustrates the continuing trend for defined benefit pension schemes to use their gilts to purchase bulk annuities, which we saw develop last year. So far in this year, we have also seen strong interest in full buy-outs. The combination of these factors make us confident that 2013 will be a growth year for bulk annuities.”
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