Legal & General claims largest ever UK bulk annuity deal

Published in: Risk, Longevity - mortality, UK

Companies: Legal & General, L&G, British Airways

Legal & General (L&G) has completed the largest ever bulk annuity deal in the UK, taking on liabilities valued at £4.4bn ($5.7bn) from the British Airways pension scheme.

L&G will take on financial responsibility for paying the pensions of nearly 22,000 of the airline’s former employees. The insurer said the deal included the conversion of an existing longevity insurance arrangement into a bulk annuity.

According to the Airways Pension Scheme (APS) trustees, the policy covers approximately 60% of all benefits the fund expects to pay out in the future.

Together with an existing asset swap and longevity swap with Rothesay Life, the deal “means that APS is now 90% protected against all longevity risk and fully protected in relation to all pensions that were already being paid as at 31 March 2018. It is also more than 90% protected against interest rates and inflation (on a Retail Price Index basis),” the trustee said.

L&G chief executive Nigel Wilson said: “As we indicated at the half-year results, the second half of 2018 is likely to be a record six months for our PRT [pension risk transfer] business and we expect to announce further transactions in the next few months. We are actively quoting on £27bn of UK PRT deals.”

In the year to date, L&G has completed £5.3bn of UK PRT sales, £300m in longevity insurance, and £419m in international PRT sales.

Across the market, PRT deals worth a combined £20bn were completed in the first half of 2018, with expectations it will reach £30bn by the end of the year.

The APS trustees were advised by Allen & Overy (transaction legal advisers), Eversheds Sutherland (scheme legal advisers), PwC (transaction investment advisers) and Willis Towers Watson (scheme actuary and funding and investment advice). 

Christopher Cundy