A total of £5.1bn of pension buy-ins and buy-outs were completed by UK pension plans in the first half of 2017, an 88% increase on the same time last year (H1 2016: £2.7bn), signalling that the acceleration of de-risking activity by pension plans since the EU referendum sees no signs of slowing down.
LCP’s analysis of insurer data for H1 2017 reveals:
- Pension Insurance Corporation (PIC) wrote 37% (£1.9bn) of all business in the first half of 2017. Legal & General (L&G) had the next highest market volumes with 30% (£1.5bn) of business. Last year L&G wrote the largest volume of buy-ins and buy-outs in 2016 with a 33% market share followed by PIC on 25%.
- There has been a record number of mid-sized bulk-annuity deals with fourteen transactions between £100m and £1bn in the first half of 2017 (H1 2016: five; H1 2015: seven). The largest transaction is an unnamed £690m pensioner buy-in with PIC with two further unnamed over £500m. The largest named transactions are a £270m full buy-out for Tullett Prebon with Rothesay Life, a £250m pensioner buy-in by Cancer Research with Canada Life and a £200m pensioner buy-in by 3i with PIC.
- Phoenix Life is now actively participating in the buy-in market targeting transactions over £250m, following the £1.2bn buy-in with their own pension plan in late 2016. This means that currently there are eight active providers in the buy-in and buy-out market, creating the highest level of competition since 2008.
- There were two longevity swaps: £800m by L&G and £300m by Zurich both with unnamed pension plans.
- There have been no annuity “back-book” transactions to date in 2017. However, there has been plenty of press speculation including Prudential’s £45bn annuity book, following Prudential’s withdrawal from the bulk annuity market last year, and Standard Life’s £15bn annuity book. Last year a significant volume of market capacity was absorbed by Aegon’s £9bn annuity book which was split between Legal & General and Rothesay Life.
- The impact of a recent slowdown in life expectancy improvements is beginning to feed through into pricing, improving affordability. However, insurers and reinsurers remain cautious about translating recent experience into long-term trends.
A summary of the data and largest transactions is set out at the end of the press release.
Commenting on the outlook for the rest of the year, Charlie Finch, partner at LCP said:
“2017 has got off to a strong start seeing buy-in and buy-out volumes almost double in the first half and continuing the strong momentum since the EU Referendum with around £12.5bn written in the past 12 months. Pricing remains keen driven by a high level of competition – particularly for pensioner buy-ins over £100m – with eight insurers actively participating following Phoenix Life’s entry to the market.
“The start of 2017 has also seen the biggest fall in life expectancies this century with the latest mortality projections from the Continuous Mortality Investigation knocking 2% to 3% off pension liabilities. This reduction benefits pension plan funding and will make full buy-out transactions more affordable.
“Looking ahead, 2017 is well on track to exceed £10bn of buy-ins and buy-outs for the fourth year running and has the potential to exceed the record £13.2bn set in 2014. There remains significant capacity and competition – even if a large back-book comes to market – providing attractive opportunities for pension plans to transfer longevity risk through a buy-in or buy-out.”
Data and statistics
Volume of buy-ins and buy-outs since 2007 (split by half year)
Buy-in/ buy-out volumes in the UK (£m)
|Insurer (ranked by H1 2017 volume)||H1 2017||2017 share||H1 2016||H2 2016||Total 2016||2016 share (rank)|
|1. PIC||1,875||37%||897||1,632||2,529||25% (2)|
|2. Legal & General1||1,504||30%||641||2,698||3,339||33% (1)|
|3. = Scottish Widows||405||8%||885||590||1,475||14% (3)|
|3. = Rothesay Life2||405||8%||6||0||6||<1% (8)|
|4. Aviva||326||6%||71||549||620||6% (6)|
|5. Just||295||6%||164||779||943||9% (5)|
|6. Canada Life||273||5%||35||93||128||1% (7)|
|7. Phoenix Life3||0||0%||n/a||1,181||1,181||12% (4)|
|Source: Insurance company data. Transactions by UK pension plans only. See notes to editor below for further details.|
Notes to editors
1 Legal & General’s H1 2016 data excludes the £3bn transfer of annuities from Aegon to L&G in May 2016. Their business with US pension plans is excluded.
2Rothesay Life’s data excludes annuity transfers with other insurers (£0.1bn from Zurich in 2016; £6.4bn from Aegon in April 2016).
3Phoenix Life announced in June 2017 that they are actively participating in the market. Their 2016 data includes the buy-in completed with their own pension plan.
Buy-ins, buy-outs and longevity swaps over £100m in 2017 (to date)
|Pension scheme||Size £m||Insurer||Type of transaction||Date||LCP lead adviser?|
|Undisclosed||800||Legal & General||Longevity swap||Jun 17||-|
|Undisclosed||690||PIC||Pensioner buy-in||Jun 17||-|
|Undisclosed||590||PIC||Pensioner buy-in||Jun 17||-|
|Undisclosed||570||Legal & General||Pensioner buy-in||Jun 17||Yes|
|Undisclosed||300||Zurich||Longevity swap||Jan 17||-|
|Tullett Prebon||270||Rothesay Life||Full buy-out||May 17||-|
|Undisclosed||270||Legal & General||Pensioner buy-in||H1 17||-|
|Undisclosed||260||Scottish Widows||Pensioner buy-in||Mar 17||Yes|
|Cancer Research||250||Canada Life||Pensioner buy-in||Mar 17||Yes|
|3i||200||PIC||Pensioner buy-in||Mar 17||Yes|
|TI Group||140||PIC||Pensioner buy-in||Jan 17||-|
|Undisclosed||130||Legal & General||Full buy-out||H1 17||-|
|Undisclosed||125||Just||Pensioner buy-in||Mar 17||-|
|Undisclosed||115||Legal & General||Pensioner buy-in||H1 17||-|
|Undisclosed||100||Aviva||Full buy-out||Apr 17||-|
|Pharmacia||100||Scottish Widows||Pensioner buy-in||Mar 17||-|
|Source: Insurance company data|
Further details of previous years can be found in LCP’s annual “Buy-ins, buy-outs and longevity swaps” de-risking report