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Record final
quarter drives UK buy-in and buy-out volumes to over £12bn for 2015

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A total of £5.4bn of pension buy-ins and buy-outs were transacted in the final quarter of 2015 making it the largest quarter on record, driven by pension plans and insurers seeking to close transactions ahead of the introduction of Solvency II on 1 January.

The new data, compiled by Lane Clark & Peacock LLP (LCP) based on the insurers’ results published this week, also shows that final buy-in and buy-out volumes in 2015 reached £12.3bn in the UK – falling only just short of the £13.2bn record set in 2014.

LCP’s analysis of insurer buy-in and buy-out data for 2015 reveals:

  • Pension Insurance Corporation (PIC) had the largest market share with £3.8bn or 31% of the total. This included a £2.4bn transaction with the Philips Pension Fund as the final step in their £3.5bn full buy-out – the largest full buy-out to date.
  • Legal and General (L&G) saw transaction volumes in the UK decline to £2.0bn from £6.0bn in 2014, as they focused on preparing for Solvency II and developing their overseas offering, but their market share in the UK at 16% was still third largest, after Rothesay Life.
  • Medically underwritten buy-ins reached nearly £1.5bn for 2015, 12% of total volumes and more than double the £0.6bn written in total prior to 2015. This included the largest medically underwritten buy-in to date at £230m by L&G in December and £1.2bn of business by Just Retirement and Partnership.

Commenting on the activity in 2015, Charlie Finch, partner at LCP said: “The final quarter of 2015 saw over £5bn of buy-in and buy-out activity in – a record level – as both pension plans and insurers sought to close transactions ahead of the introduction of Solvency II on 1 January."

Finch continues: “Full buy-out pricing has become more challenging in 2016 as insurers get to grips with Solvency II. However pricing for pensioner buy-ins remains highly competitive with at least eight insurers actively quoting. Pensioner buy-ins continue to be a cost-effective way for pension plans to take down risk for carefully selected subsets of their liabilities. As a result, we expect buy-ins will play a key role over 2016 as part of a phased de-risking strategy while schemes continue to focus on closing pension deficits.” 

The chart below shows the volume of buy-ins and buy-outs from 2007 to 2015.

LCP chart volumes

Buy-in/ buy-out premium written(£m)

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Total 2015 (share) Total 2014 (share)

Aviva

2

405

78

499

984 (8.0%)

874 (6.6%)

Canada Life2

n/a

n/a

5 27

32 (0.3%)

n/a

Just Retirement

93

161

104

598

956 (7.8%)

441 (3.3%)

Legal & General

644

501

92

740

1,977 (16.1%)

5,969 (45.2%)

Partnership

24

44

24

186

277 (2.3%)

247 (1.9%)

PIC

40

640

259

2,872

3,811 (31.0%)

2,567 (19.5%)

Prudential

0

1,174

320

21

1,515 (12.3%)

1,706 (12.9%)

Rothesay Life

0

6751

1,600

631

2,338 (19.0%)

1,400 (10.6%)

Scottish Widows2

n/a

n/a

0

394

394 (3.2%)

n/a

Total

804

3,600

2,482

5,400

12,284

13,203

Source: Insurance company data. Transactions by UK pension plans only.
1 Excludes the £1.3bn transfer of annuities from Zurich to Rothesay Life (and the subsequent £82m up-size in December).
2 Canada Life and Scottish Widows entered the buy-in and buy-out market in the second half of 2015 so have no business in 2015 Q1 and Q2.

Top 11 largest buy-ins and buy-outs in 2015 (£m)

Pension scheme

Size

Insurer

Month

LCP lead advisor

1

Philips

2.400

PIC

Nov

Trustee-side

2

Civil Aviation Authority

1,600

Rothesay Life

Jul

 

3

Northern Bank

680

Prudential  Apr

4

Lehman Brothers

675

Rothesay Life May  

5

Undisclosed

535

PIC Apr
6 ICI 500 Legal & General Mar
7 ICI 500 Prudential Jun
8 ICI 500 Legal & General Jun
9 Wiggins Teape 400 Scottish Widows Nov  
10 Alcatel-Lucent 300 Aviva Jun  
11 TKM 300 Aviva Nov  

Source: Transaction press releases

Longevity swaps premium written in 2015 (£m)

Pension scheme

Intermediary insurer

Q1

Q2

Q3

Q4

Total

MNOPF

MNOPF IC Ltd (captive insurer)

1,500

-

- -

1,500

Scottish Power

Abbey Life (Deutsche Bank)

2,000

-

- -

2,000

AXA UK

AXA

-

-

2,800 -

2,800

Heineken

Friends Life (Aviva)

- - 2,400 -

2,400

RAC

Aviva Life & Pensions

- - - 600

600

Undisclosed

Zurich Assurance

- - - 90

90

Total

3,500

- 5,200 690

9,390

Source: Publicly announced transactions to date

Further details of previous years can be found in here LCP’s report “Buy-ins, buy-outs and longevity swaps 2015”

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