Rothesay insures a Cobham pension plan through £280m bulk annuity
15th August 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 a bulk annuity transaction with a pension plan of Cobham plc, the FTSE250 aerospace and defence business.
- The transaction is with the Trustees of the Cobham Pension Plan with the support of Cobham plc, covering £280m of pension liabilities in total.
- The policy is being held as an investment by the Trustees.
- UK gilts and cash were exchanged for a bulk annuity insurance policy that provides close matching to the retired members’ benefits.
- The policy gives Cobham a secure, low risk asset with additional protections, such as cover against longevity risk and pension increase risk.
- Administration and payment of members’ benefits are unaffected by this transaction.
The process was run by the Company and its adviser KPMG who led negotiations with insurers. The Trustees were advised by LCP.
Addy Loudiadis, CEO, Rothesay Life, said: “This is Rothesay Life’s tenth transaction worth over £250m and we are continuing to benefit from strong pension fund demand. The Cobham transaction further highlights Rothesay Life’s robust business model and strong execution capabilities. We provided Cobham and the Trustees with price certainty from when we were selected and then agreed contracts quickly.”
Simon Nicholls, Chief Financial Officer of Cobham said: “This transaction, which was prefaced in the Group’s 2012 financial statements and follows two smaller buy-in transactions on separate defined pension plans completed in 2011, represents a significant step towards de-risking the Group’s defined benefit pension plans using the Plan’s assets and adds further levels of security to the Plan’s obligations towards its members.”
Tom Seecharan, Deal Manager at KPMG said: “This transaction was made possible by close collaborative working between the Company and Trustees. We were delighted to help run an efficient and thorough process which allowed both parties to take advantage of the attractive terms available from Rothesay Life for the mutual benefit of the members, Trustees and sponsor.”
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Alex Child-Villiers or William Barker
Cobham protects lives and livelihoods with its differentiated technology and know-how, operating with a deep insight to customer needs and agility. The Group offers an innovative range of technologies and services to solve challenging problems across commercial, defence and security markets, from deep space to the depths of the ocean. It has market leading positions in air-to-air refuelling; aviation services; audio, video and data communications, including satellite communications; defence electronics; life support and mission equipment. The most important thing Cobham builds is trust.
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 £11 billion of insurance contracts. In 2012, Rothesay Life wrote over £1 billion of new bulk annuity business and has made a strong start to 2013.
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 include the pension schemes and members associated with such names as RSA, British Airways, P&O, Rank, Uniq, General Motors, the MNOPF (Merchant Navy Officer Pension Fund) and Smith & Nephew.
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.
KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 156 countries and has 152,000 professionals working in member firms around the world. 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.
KPMG’s UK pensions practice comprises around 450 pensions professionals who are actuaries, accountants, CFA or Pension Management Institute qualified. It has an established and growing Trustee practice and the largest dedicated corporate pensions team in the UK. It was awarded Employee Benefits Consultancy of the year at the UK Pensions Awards 2013.
KPMG’s specialist pensions insurance team has advised clients in more than 40 transactions of a ra nge of sizes covering a total of around £2 billion of liability transfer to the insurance market since 2011. It has worked on many innovative structures, such as the first full buy-out while leaving the scheme open to new accrual, as well as the first buy-for a Local Government Pension Scheme.
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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