Pensions - Articles - L&G acquires £3bn UK annuity portfolio from Aegon


Legal & General today announced it has acquired a £3bn annuity portfolio from Aegon. The transaction has been structured initially as a reinsurance contract and covers approximately 27,000 of in-payment policyholders who will remain customers of Aegon during this period. They will continue to be serviced by Aegon until the effective date of a Part VII Transfer which is subject to regulatory and court approval.

 Transitional benefits will be available to offset the Solvency II risk margin. Legal & General has chosen not to reinsure the longevity risk in relation to this transaction. On a proforma basis, the ‘Day 1’ impact of this transaction decreases the Group’s Solvency II surplus by c.£50m and the Solvency II coverage ratio by c.3 percentage points.

 Kerrigan Procter, Managing Director of Legal & General Retirement, said: "We are delighted Aegon has chosen Legal & General to secure its policyholders’ annuities. Back book annuity risk transfer deals can be executed efficiently under our postSolvency 2 model. Our pricing of this transaction is consistent with achieving our cost of capital hurdle rate. In the UK there is an estimated £100bn of Individual Annuities in back books and we expect further consolidation of these back books.

 “As well as this deal, other significant transactions in recent months include a further buy-in with ICI in excess of £300m, the UK’s largest medically underwritten contract for Kingfisher for £230m and our first two US PRT deals for $450m and $65m.”

 Alex Wynaendts, CEO of Aegon, added: “I am very pleased that we are able to announce this transaction. Achieving the divestment of our UK annuity portfolio is an important step in the strategic repositioning of our business in the United Kingdom. The divestment enables us to fully focus on growing our platform business. At the same time, I am pleased that we have found in Legal & General a good home for our annuity customers.”

 Legal & General Retirement has written approximately £550m of total annuities year to date, in addition to the £3bn Aegon transaction, with a further £150m in lifetime mortgage lending. Globally as at 31 March 2016, Legal & General manages an annuity book of £45.5bn, and provides annuity benefits to over a million customers. In full year 2015 Legal & General Retirement (LGR) completed £2.4bn of bulk annuity deals. LGR’s operating profit grew 49% in 2015 to £639m and generated £417m net cash, up 22% on 2014.

 As at the end of December 2015, Legal & General Retirement had c.£10bn of undiscounted VIF, on an EEV basis, which over the next five years is expected to unwind c.£0.4bn each year.

 We are going to be holding a conference call to talk through the transaction, the continued attractiveness of the bulk market opportunity in the UK and US and why Legal & General is well placed to benefit from those opportunities.

Back to Index


Similar News to this Story

Wish list for the occupational pensions industry in 2025
As one year closes and another begins, it's an opportune moment to set our sights on the future. The UK occupational pensions industry faces nume
PSIG announces outcome of Consultation
The Pensions Scams Industry Group (PSIG), which was established in 2014 to help protect pension scheme members from scams, today announced the feedbac
Transfer values fell to a 12 month low during November
XPS Group’s Transfer Value Index reached a 12-month low, dropping to £151,000 during November 2024 before then recovering to its previous month-end po

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.