Rothesay Life completes through a £440m full buy-out with InterContinental Hotels

3rd September 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 assumed all the defined benefit (i.e. non money purchase) liabilities associated with paying the members of the InterContinental Hotels UK Pension Plan (the “Plan”) through a full buy-out transaction.
Transaction highlights:

  • The Trustee has fully insured the benefits payable to all members of the Plan including any missing beneficiaries that emerge in the future.
  • The Trustee has secured with Rothesay Life additional future pension increases which were previously only provided at the discretion of the corporate sponsor to the Plan.
  • As a result of current market conditions, there was a requirement for only a minimal additional contribution, over assets currently held in the Scheme, from the corporate sponsor in order to secure the benefits in full (including the additional improvements).
  • Following a month of intensive due diligence, Rothesay Life provided the Trustee and the corporate sponsor with an approach that will deliver a clean break from the liabilities associated with the Plan including those relating to data errors.
  • As well as providing additional protection for members, Rothesay Life’s insurance policy has been structured to enable the Plan to move from buy-in to buy-out in an accelerated timescale.

In the competitive process of choosing an appropriate insurer and negotiating terms, the Trustee was advised by Mercer, Hymans Robertson and Allen & Overy and the corporate sponsor was advised by PwC and Freshfields. Independent Trustee Services, in its role as director of the Trustee, provided support in the negotiation of the transaction.

Addy Loudiadis, CEO, Rothesay Life, said: “We are delighted to add the members of the InterContinental Hotels UK Pension Plan to our growing client base. This transaction is a further illustration of the momentum that Rothesay Life has in the pensions de-risking market at a time when that market is showing strong signs of growth.”
She continued: “This year is shaping up to be one of the most productive in terms of volume of risk transferred to insurers. At Rothesay Life, we continue to focus on adding value in the structuring and execution of each transaction we work on.”

Sam Dow, Chairman of the Trustee of the InterContinental Hotels UK Pension Plan, said: “The Trustee’s first priority has been to ensure the future security of members’ benefits. The Plan’s strong funding, following additional financial support from its corporate sponsor, prompted consideration of a buy-in/ buy-out of the Plan’s liabilities. Following a comprehensive review of insurance providers, the Trustee chose Rothesay Life on a combination of product structure, value-for-money, price certainty and the long-term security it brings as a low risk regulated insurer. All parties worked professionally and collaboratively to agree the final price and terms over a short time, resulting in a great outcome for the members of the Plan.”

Tom Singer, Finance Director of IHG said: “IHG fully supports the Trustees' decision to insure the defined benefit section of its UK Pension Plan with Rothesay Life. This transaction will provide additional security for members of the Plan and will also help to de-risk IHG's balance sheet by transferring the defined benefit liabilities of the Plan to Rothesay Life.”

Harry Harper, Principal at Mercer and adviser to the Trustee, said: “By arranging this deal, members have been given increased security and the peace of mind that important Plan benefits, some of which were previously discretionary, have now become guaranteed. We are pleased that the partnership approach between the Company and Trustee led to an effective broking process; we were able to proceed rapidly once conditions were right and agreed a unique contract with Rothesay Life whereby the insurer will be able to quickly issue individual policies to members.”

Jerome Melcer at PwC, adviser to InterContinental Hotels Group, said: “We were delighted to run a competitive tender process for IHG and work with Mercer to present a number of attractive proposals to the Trustee. We achieved IHG’s objective of removing the risk and liabilities whilst fully securing member benefits at an attractive price. Rothesay Life provided the price certainty our client required, by locking the economics of the insurance policy to a portfolio of assets that the Trustee was able to transition into quickly. In addition Rothesay Life provided an innovative solution to enable the Plan to move to full buy-out over a short period.”

ENDS

Contact:
Temple Bar Advisory Limited +44 (0)20 7002 1080 or +44 (0)7795 425580
Alex Child-Villiers or William Barker.

About InterContinental Hotels Group

IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of nine hotel brands, including InterContinental® Hotels & Resorts, Hotel Indigo® Hotels, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express® Hotels, Staybridge Suites® Hotels, Candlewood Suites® Hotels, EVEN™ Hotels and HUALUXE™ Hotels & Resorts.
IHG manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme with over 74 million members worldwide. The programme was relaunched in July 2013, offering enhanced benefits for members including free internet for Elites across all hotels, globally.
IHG franchises, leases, manages or owns over 4,600 hotels and 678,000 guest rooms in nearly 100 countries and territories. With more than 1,000 hotels in its development pipeline, IHG expects to recruit around 90,000 people into additional roles across its estate over the next few years.
InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales.
Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihg.com/media, www.twitter.com/ihg, www.facebook.com/ihg or www.youtube.com/ihgplc.

About the Plan

The InterContinental Hotels Group UK Pension Plan was established on 1st April 2003, in anticipation of the separation of the Six Continents hotel and soft drinks businesses from its pubs and restaurants business (which took place on 15 April 2003).
The Plan currently supports benefits payable to approximately 3,000 members and their contingent beneficiaries. (This membership is made up of c.1,800 deferreds and c.1,100 pensioners in payment.)
In addition to the £440m of defined benefit pension assets and liabilities (measured on an insurance buy-out basis), the Plan has a substantial and growing defined contribution section that is used for auto enrolment purposes. In order that the defined benefit pension obligations can be transferred in full to Rothesay Life, the Plan will be split to ensure only those obligations associated with the defined contribution pensions remain with the Plan and with the InterContinental Hotels Group.

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 £12 billion of insurance contracts. In 2012, Rothesay Life wrote over £1 billion of new bulk annuity business and has now already written £1 billion 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 and Cobham.
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.

www.rothesaylife.co.uk

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 42 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.

About PwC

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.
"PwC" is the brand under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.

Key terms:

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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