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Plenum 2013 – Financial Services Executive Search

Pension Buyout

2013 likely to surpass 2012 according to industry sources Views from the coalface, what your peers think about the buyout market in 2013.

More of the huge ‘Super Tanker’ deals that we saw in 2012 will come thick and fast in 2013 as the estimated one trillion plus pounds of UK pensions requiring de-risking move off company balance sheets to insurers and re-insurers. This year will see a buoyant hedging market with big deals from UK firms and surprising contributions from non UK companies.

Big drivers coming to bear this year include exchanging gilts for annuities, exploring bulk annuities and hedging. The 2012 trend of low yield, high value gilt swaps for an insurance policy will continue in 2013 especially as bigger firms are concentrating on their pensions more and getting their funds ready to pounce as they closely monitor the buyout market for a less expensive time to move.

Numerous large deals will be generated in 2013 due to low yields on gilts pushing up the value of a deficit making trustees more likely to hedge. Hedging has become the done thing and this trend generates it’s own momentum.

2012 was about pricing relative to gilts and swapping gilt portfolios for bulk annuity without a high cost. Pension trustees have sophisticated in house tools and there is a lot of capacity in the market as the underlying reinsurance market is healthy.

Regulatory change for insurers, low gilt yields, and uncertainty over equity prices and the real estate market and will all drive business in 2013

Firms to watch in 2013; Just Retirement and Partnership along with some Private Equity houses were mooted as potential newcomer into the bulk annuity market this year.

The best and biggest of 2012

Swiss Re did two massive super tanker deals in 2012 ‘LV=’ and ‘AkzoNobel’

Reinsurer Swiss Re announced the completion of an £800m ($1.3 billion) longevity insurance transaction with UK insurer LV=. The transaction see’s Swiss Re providing longevity insurance for over 5,000 members of the LV= pension fund and includes the longevity exposures associated with 1,000 members who are yet to retire.

Swiss Re has signed a £1.4bn swap to cover one of chemicals group AkzoNobel's UK pension funds against the risk its members will live longer than expected.

Researched and produced by Angus Henderson, Plenum Group

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To discuss further please contact Angus Henderson ahenderson@theplenumgroup.com Originally published by The Plenum Group www.theplenumgroup.com