Updated Perspectives on the Bulk Annuity Market – March 2014

LLoyd Richards contributed to the writing of this blog post

Last summer we talked about the players, the underdogs and the new entrants to the bulk annuity market. Since then the market has been lively with acquisitions and strong growth seen by some firms. We look once more at the current positions of the companies involved and comment on recent developments, including:
  • PIC remains a dominant force in the bulk annuity market and completes a transaction in record time,
  • Aviva Annuity’s parent company experiences strong growth,
  • Rothesay Life acquires MetLife Assurance Ltd,
  • Partnership and Just Retirement’s parallel progression moves at different speeds.

The players keep playing

Pension Insurance Corporation (PIC) has remained a dominant player in the bulk annuity market. In July 2013, PIC completed the UK’s largest pension insurance buyout for EMI Group Pension Fund, covering £1.5bn of liabilities. This transaction was reported to have been completed in record time with every member written to within one week of the transaction occurring. This success is likely to help spur its growth in 2014.

Aviva Plc had a successful 2013 following substantial losses the year before. It saw a 6% increase in operating profit to £2,049m, along with huge growth in its share price of approximately 57%. Aviva was also in the news last week also after its own pension scheme completed the largest longevity swap in the UK, totalling £5bn in a single transaction with Swiss Re, Munich Re and SCOR. For comparison, this is more than 50% of all longevity swaps in 2013 (£8.9bn). 2013 was a year of restructure for Aviva, and precisely what this means for its annuity subsidiary Aviva Annuity is not yet certain. The group continues to dispose of its non-core business in its drive to return to what it does best, and given the relatively narrow focus of Aviva Annuity (the company has previously stated that it will focus on transactions smaller than £50m) it is difficult to see how it will grow its market share without increasing this transaction size.

One less underdog to nip at their heels

The most recent market development involved MetLife’s bulk annuity carrier, MetLife Assurance Ltd (MAL). MAL had long since been rumoured to be for sale and speculation surrounding its future had been significantly affecting business volumes; it seemed that trustees believed there might be risks should MetLife withdraw from the market. Ratings agencies took a similar stance, with S&P lowering MAL’s rating from A+ to A-, citing concerns about limited medium-term prospects and a perceived inability to achieve meaningful growth. However, in mid-February MetLife announced that Rothesay Life would be acquiring its UK bulk annuity portfolio with approximately £3bn of assets under management. The deal is scheduled to be completed in the second quarter of 2014. Rothesay Life has been one of the most active bulk annuity players in the market and it is no stranger to acquisitions, having picked up struggling Paternoster in 2011.

This transfer of business follows the now well-established trend set by PIC’s purchase of Synesis several years ago and L&G’s purchase of Lucida last year.

Parallel paths diverge

Partnership and Just Retirement continued their similar strategies; having entered the bulk annuity market within a few months of each other in 2012, 2013 saw them float on the London Stock Exchange, again within a few months of each other. Both companies use medical underwriting to differentiate themselves from the opposition and have built solid reputations in the individual annuity market. Despite their parallel strategies the fortunes of Partnership and Just Retirement in the bulk annuity market have differed to date; as Partnership has steadily built a portfolio of completed transactions whilst Just Retirement’s progress has been a little slower. Partnership capped off a successful year with the largest medically underwritten transaction to date, worth £33m, and started 2014 by writing the industry’s first whole-of-market underwritten buy-in. It may have to look over its shoulder as two of the Old Guard – Aviva and L&G – add medical underwriting to their offering, but so far these firms have approached the subject area less aggressively, unsurprising given their existing presence in the smaller transaction size end of the market.

Would anyone else like to play?

Overall, the past year has seen some interesting changes to the market, with two less names after the acquisitions of Lucida and MetLife, and two entrants as Partnership and Just Retirement brought their medical offerings to the bulk stage. Whispers in the wind talk of other companies considering entry, or re-entry, with Canada Life touted as being potentially interested in a return following its departure in 2012.

The annual reports and regulatory returns of these companies will soon be published, and when they are we will report fully on the positions of all the key insurers. Keep an eye on our blog for updates.


Hours after this blog was uploaded George Osborne announced in the Budget that the requirement for retirees to purchase an annuity was being scrapped. This has had an immediate and substantial impact on the share prices of some of the companies named above.

If individual annuity sales are set to fall we may see increased competition in the bulk annuity market if insurers redirect existing resources as opposed to scaling back operations. Keep following our blog to stay appraised of the latest developments.