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Rothesay completes a £484m pensioner buy-in with The Philips Pension Fund

2nd October 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 The Philips Pension Fund (the “Fund”).

Transaction highlights:

  • The insurance policy is being held as an investment by the Trustee of the Fund and covers a £484m subset of liabilities owed to pensioners in payment and their contingent beneficiaries.
  • UK gilts and cash that were held by the Fund have been exchanged for the insurance policy.
  • The policy gives the Fund a secure, low risk asset with additional protections, including cover against longevity risk and pension increase risk.
  • Administration and payment of Fund members’ benefits are unaffected by this transaction.
  • This transaction is a further example of a large pension fund executing a mid -market transaction (£100m to £500m) in order to insure a portion of its liabilities, an area in which Rothesay Life has a key focus.

The competitive process of choosing an appropriate insurer and negotiating terms was run by the Trustee and its adviser Lane Clark and Peacock.

Addy Loudiadis, CEO, Rothesay Life, said: “We are delighted that the Philips trustees have selected Rothesay Life to manage a portion of their risk in paying defined benefit pensions to their members."

She continued: “Rothesay Life was able to provide both the trustees and the sponsoring employer with the price certainty they required, by locking our economics to a portfolio of assets already held by the Fund, immediately on being selected as the chosen insurer.”

David Jordan, Chairman of the Trustee of The Philips Pension Fund, said: “The trustees spent significant time assessing the merits of purchasing a buy-in contract in the context of the Fund’s low risk investment strategy. A key requirement was to secure, at optimal cost, a comprehensive insurance policy that would deliver a close match to the Fund’s obligations to its members. Rothesay Life were pragmatic in their approach to designing the insurance solution, demonstrating flexibility in order to address our needs.”

Clive Wellsteed, Partner at LCP, adviser to the Trustee, said: “With £3.5bn of liabilities in total, we helped the trustees understand which parts of the liabilities provided best value for the risk reduction to be achieved. The Trustee working group, LCP and Rothesay Life worked closely together to ensure the terms agreed early on supported a speedy and efficient negotiation phase to final contract. The market continues at a brisk pace: 2013 volumes to-date have already exceeded the £4.4bn completed in the whole of 2012.”


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Alex Child-Villiers or William Barker

About the Fund

The Philips Pension Fund supports all the defined benefit pension obligations payable to the employees and former employees of Philips in the UK. As at 31st March 2013, the Fund’s membership had 19,593 pensioners in payment and 13,468 deferred members, having been closed to new members in June 2011. As at 31st March, the Fund had assets of £3.37bn supporting £3.30bn of liabilities (measured on an actuarial funding basis). The assets are now invested in a low risk asset strategy of UK gilts, corporate bonds and similar investments.

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 now already written £1bn in 2013. This strong growth 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), Smith & Nephew, Cobham and InterContinental Hotels.

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.

About LCP

LCP is a firm of financial, actuarial and business consultants, specialising in the areas of pensions, investment, insurance and business analytics.

LCP has led the way in helping pension schemes to de-risk using buy-ins and buy-outs, including:

  • the first £100 million pensioner buy-in by Hunting in January 2007;
  • innovative transactions for GSK in November 2010 (£900 million) and the Uniq plc Pension Scheme in December 2011 (£830 million);
  • the launch of a fixed-fee buy-in service - aimed at enabling smaller schemes to transact on similar terms to larger schemes - in April 2012; and
  • acting as lead adviser to five of the 14 transactions over £100 million in 2012, including transactions for General Motors and the Tate & Lyle Group Pension Scheme

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