Bulk annuity transactions worth almost £1.7bn were completed by UK insurers in the first half of 2013, setting the market on course for its most successful year since 2008, according to our latest research.
The bulk annuity market is now expected to far exceed the value of business won in 2012 with over £3bn of transactions already completed following the £1.5bn buyout of the EMI Group Pension Fund by Pension Insurance Corporation (PIC) in July – the largest ever buyout completed in the UK.
In the second quarter, transactions totalling £820m were finalised, building on an extremely positive first quarter of the year in which £876m of business was completed.
Preceding the EMI transaction, PIC completed the greatest value of business in quarter two with deals worth £518m. Legal & General had the second highest total with £206m.
One longevity swap transaction was announced in the second quarter of 2013 – the Bentley pension scheme’s £400m transaction with Abbey Life. Meanwhile, Goldman Sachs has announced that it is planning to sell a majority stake in its bulk annuity insurance arm Rothesay Life over the next 12 months, while Legal and General announced it had completed its acquisition of Lucida for £149m.
The bulk annuity business completed in the second quarter of 2013 backs up the strong start to the year seen in quarter one. Some schemes have been monitoring affordability and have taken advantage of market opportunities when they have arisen. Due to the positive performance of equities over 2013 and the recent increase in yields, we are finding that some schemes which couldn’t transact a year ago may be able to transact now.
The relative winners as market conditions improve will be those schemes which are well-prepared and can take advantage quickly as opportunities arise.