Rothesay Life insure two Smith and Nephew pension plans for £190m
15th May 2013
Rothesay Life, one of the leading life insurers specialising in providing de-risking solutions to UK defined benefit pension schemes, is pleased to announce that it has entered into bulk annuity transactions with two pension plans of Smith & Nephew, the FTSE100 medical technology business.
- The transactions are with the Trustees of the Smith & Nephew UK Pension Fund and the Smith & Nephew UK Executive Scheme, covering £190m of pension liabilities in total.
- Both transactions involved an exchange of UK gilts for a bulk annuity insurance policy that provides close matching to the Trustees’ chosen portion of their liabilities.
- The transaction gives Smith & Nephew secure, low risk assets and additional protections, such as cover against longevity risk and pension increase risk
- The policies are being held as investments by the Trustees and the administration and payment of members’ benefits are unaffected by these transactions
The combined transaction is a further example of large pension schemes executing mid -market transactions (£100m to £500m) in order to insure a portion of their liabilities, an area in which Rothesay Life has a key focus. Rothesay Life wrote over £1 billion of new bulk annuity business in 2012 and reports a strong pipeline of opportunities, which are expected to produce a flow of new business in 2013 to underpin its appetite for larger, more bespoke transactions. The Trustees were advised by LCP who led negotiations with insurers. The Company was advised by KPMG.
Addy Loudiadis, CEO, Rothesay Life, said: “This transaction illustrates the continuing trend for defined benefit pension schemes to use their gilts to purchase bulk annuities, which we saw develop last year. So far in this year, we have also seen strong interest in full buy-outs. The combination of these factors make us confident that 2013 will be a growth year for bulk annuities.”
Temple Bar Advisory Limited +44 (0)20 7002 1080 or +44 (0)7795 425580
Alex Child-Villiers or William Barker
About Smith & Nephew
Smith & Nephew is a global medical technology business dedicated to helping improve people's lives. With leadership positions in Orthopaedic Reconstruction, Advanced Wound Management, Sports Medicine and Trauma, Smith & Nephew has almost 10,500 employees and a presence in more than 90 countries.
About Rothesay Life
Rothesay Life was established in 2007 and has become one of the leading providers of regulated insurance solutions in the UK market for pensions de-risking, with over £10 billion of insurance contracts. In 2012, Rothesay Life wrote over £1 billion of new bulk annuity business.
The strong growth of the business has been achieved through the steady accumulation of pension scheme clients and the acquisition of Paternoster in 2011.
Existing Rothesay Life clients including the pension schemes and their members associated with such names as RSA, British Airways, P&O, Rank, Uniq, General Motors and the MNOPF (Merchan t Navy Officer Pension Fund).
Rothesay Life is a secure long term provider of pensions, focused on:
- a flexible and committed approach to execution;
- ongoing risk management to maintain balance sheet strength; and
- robust operational processes.
Rothesay Life is owned by The Goldman Sachs Group Inc, but is separately capitalised under UK insurance regulation. Rothesay Life is authorised and regulated by the UK Prudential Regulatory Authority.
LCP is a firm of financial, actuarial and business consultants, specialising in the areas of pensions, investment, insurance and business analytics.
LCP is a leading adviser in the pension buy-in and buy-out market.
In 2012, LCP were lead advisor in five of the 14 transactions over £100m, including the General Motors UK Retirees Pension Plan (£230 million), Tate & Lyle (£350 million), Gartmore (£160 million) and Vestey (£115 million).
During 2011, LCP was lead adviser to three of the five largest buy-ins and buy-outs including those for the Uniq plc Pension Scheme and Home Retail Group.
In 2010, LCP was lead advisor to GlaxoSmithKline on its £900 million pensioner buy-in.
The firm has more than 500 staff based at locations in London, Winchester, Brussels, Zu rich, Basel, Utrecht, Dublin and Abu Dhabi. Please visit www.lcp.uk.com for further information. LCP is part of the Alexander Forbes group of companies, which employs over 4,000 people internationally. For more information on Alexander Forbes and its insurance, risk and financial services, please visit the website at www.alexanderforbes.com.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
Bulk annuity – An insurance policy through which a pension scheme can secure the retirement income payable to a group of people in exchange for paying a premium to the insurer. In taking out the insurance policy, the pension scheme is purchasing protection against all risks associated with paying defined benefit pensions including longevity, inflation and investment performance risks.
Buy-in – A bulk annuity insurance policy held as an asset of a pension scheme, paying income to the pension scheme that is reference (only for the purposes of calculating the amount of income payable) to an agreed group of members and their benefits. The income from a buy-in benefits all members of the pension scheme, not just those against which it is referenced.
Buy-out – A bulk annuity policy that is structured to convert to a set of individual annuity policies (at the election of the pension scheme’s trustees) following the wind-up of the pension scheme. The individual annuity policies are written in the names of the members against which the bulk annuity policy had been referenced. All buy-outs begin as buy-ins while the pension scheme is being wound-up.
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