By Simon Jessop
LONDON (Reuters) - British-based Rothesay Life broke new ground for the burgeoning pension risk transfer industry on Friday, striking an insurance deal that protects the retirement savings of the largest-ever number of yet-to-retire members.
The 3.8 billion pounds 'buy-in' deal sees Rothesay guarantee the benefits for 17,000 pensioners and around 10,000 workers in the Allied Domecq Pension Fund, taking Rothesay's total assets past 50 billion pounds.
The deal will see Rothesay assume the risk that investment returns falter or that members live longer than expected, so-called longevity risk, which companies are keen to transfer to insurers and off their balance sheet.
Established in 2007 and backed by private-equity giant Blackstone (NYSE:BX) and Singapore's sovereign wealth fund, GIC, Rothesay currently insures the pensions of more than 800,000 people. Others active in the sector include Legal & General (L:LGEN) and Pension Insurance Corporation.
The Allied Domecq deal comes just a day after Rothesay agreed Britain's biggest-ever pension transfer deal with telecoms firm Telent over its defined benefit, or final salary, scheme.
As well as initially insuring Telent's scheme, as with Allied Domecq, the Telent deal will eventually see Rothesay take on full responsbility for the scheme members, known as a 'buy-out'.
The successful completion of two large deals comes as Rothesay mulls an appeal against a court ruling stopping the transfer of 12 billion pounds in annuities from Prudential (L:PRU), with a decision expected imminently.
"This transaction is further evidence that large maturing pension schemes are increasingly looking to secure de-risking opportunities," said Sammy Cooper-Smith, who works on business development at Rothesay.
"Rothesay Life's balance sheet strength, expertise and considerable ongoing shareholder support means that we are a very good insurance partner to the largest pension schemes in the UK."
Given a healthy pipeline of potential new business, Rothesay Life's shareholders have contributed a further 200 million pounds of new equity into the company, Rothesay said, taking total new equity raised in 2019 to 700 million pounds.