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Rothesay Life announces £150m transaction with the TI Group Pension Scheme

8th December 2011

Rothesay Life and the TI Group Pension Scheme have entered into a £150m bulk annuity deal. The transaction was executed through Rothesay Life’s target-based pricing mechanism, used for the first time over an extended period. Movements in the Scheme’s assets, and changes in Rothesay Life’s premium requirement were closely monitored over a period of three months. The transaction was executed as soon as these matched.

The bulk annuity, held as a buy-in policy, secures the benefits relating to approximately 1,800 pensions in payment and represents an increase in the overall level of insurance protection afforded by the Rothesay Group to the Scheme. The Rothesay Group already insures the benefits payable to a separate group of 4,000 TI Group Pension Scheme pensioners.

Addy Loudiadis, Chief Executive, Rothesay Life, commented: “We are delighted that the Trustee of the TI Group Pension Scheme has chosen to increase the benefits insured within our Group. By working closely with the Trustee to finalise documentation, we were immediately ready to lock in the Trustee’s target economics within hours of the target being hit. We believe this target based mechanism adds real value to trustees in achieving their aim to secure liabilities with a regulated insurer.”

Mike Abrams, Secretary to the Trustee of the TI Group Pension Scheme, said: “Scheme members will see no change in the amount of their benefits or the way in which they are paid as a result of this investment. The Trustee has chosen to purchase annuities at a satisfactory price - working with Rothesay Life, we designed a process that allowed us to secure the policy when the value of our available assets was equal to the premium payable with no impact on the Scheme’s funding requirements.”


Target-based Pricing Mechanism
The Trustees’ target was set by reference to the value of a portfolio of assets that they had made available for the transaction. While the value of a pension scheme’s assets and an insurer’s premium are both affected by investment markets, the impact of market movements on each will differ. The objective of the mechanism that Rothesay Life put in place for the TI Group Pension Scheme, was to derive benefit from this mismatch and the volatility created as investment markets moved, in order to meet the Trustee’s target.
Following upfront negotiation and agreement of contractual documentation, Rothesay Life began a process of frequently updating both their premium and the value of Scheme’s assets, to reflect prevailing investment market conditions, monitoring the ongoing difference between the two. Because the pension scheme was ready to transact throughout the monitoring phase, Rothesay Life was able to reflect in its pricing attractive investment opportunities as they arose.

Rothesay Life
Rothesay Life is an insurance company established in the UK as a wholly-owned subsidiary of The Goldman Sachs Group, Inc. and is authorised and regulated by the FSA.
Rothesay Life aims to provide tailor-made solutions for pension schemes seeking to mitigate their exposure to financial risks, thereby meeting the requirements of pension scheme members, trustees and corporate sponsors.

Keith Satchell Chairman
Former CEO of Friends Provident plc and a former Chairman of the Association of British Insurers.

Addy Loudiadis Chief Executive
Managing Director at Goldman Sachs, served as the co-head of the Goldman Sachs European Financing Group and co-head of the Investment Banking Group in Europe.

Goldman Sachs

The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centres around the world.

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