Legal & General agrees two further longevity Insurance arrangements covering Â£1.8bn of liabilities with BAE Systems Pension Schemes.
19 December 2013
Legal & General has simultaneously put in place separate longevity insurance arrangements for two BAE Systems pension scheme arrangements – The Royal Ordnance Pension Scheme and The Shipbuilding Industries Pension Scheme, (“the schemes”). The new arrangements cover a total of £1.7bn of liabilities as measured using the schemes' funding assumptions, or £1.8bn discounted at Libor, which protects the schemes against the financial risk of 17,000 members living longer than expected. The pensioners of the schemes will see no changes to the administration of their benefits.
This follows the £3.2bn, (£2.7bn on the Plan’s funding assumptions) arrangement implemented by
Legal & General for the BAE Systems 2000 Pension Plan earlier this year. Legal & General estimates that these transactions have taken the total market volume for pensions insurance de-risking in the UK to in excess of £16bn in 2013. This demonstrates the increasing appetite of pension schemes and their sponsors, for insuring pension scheme risk, as well as Legal & General's position as a leading provider in the de-risking and longevity insurance market.
Tom Ground, Head of Legal & General's Bulk Annuity and Longevity Insurance business, said:
"Legal & General is delighted to have worked with the Trustees of The Royal Ordnance Pension Scheme and The Shipbuilding Industries Pension Scheme, to put in place these arrangements and to assist BAE Systems in further de-risking its pension obligations. Legal & General has now insured over £7.5bn of pension scheme risk in 2013, including the acquisition of Lucida, and secured over 40% of the insurance de-risking business written across the market this year.
We remain committed to providing bespoke solutions to help both scheme trustees and sponsors achieve their de-risking objectives. Our ability to complete two longevity insurance transactions simultaneously is a reflection of our expertise and experience in this area and our track record of seeing processes through to completion quickly and efficiently ensures trustees get best value through the engagement we are able to obtain from reinsurers.”
Nigel Tinsley, Group Pensions Director at BAE Systems, said: "Following the success of the transaction we completed early in 2013, we are again pleased to have reduced the longevity risk exposure within another two of our pension scheme arrangements. We conducted a competitive selection process to appoint Legal & General in June and worked closely with Aon Hewitt to conclude the projects, quickly and efficiently."
Martin Bird, Senior Partner and Head of Risk Settlement at Aon Hewitt, said: "We worked closely with both sets of Trustees and with BAE Systems, to structure and execute the collateralised insurance arrangements. Notable features of these deals included structuring CPI linked longevity protection and developing an effective structure appropriate for the sectionalised nature of the Shipbuilding Industries Pension Scheme."
Corporates, trustees or advisers looking for further information on the pension scheme insurance de-risking solutions available from Legal & General should call the team on 020 3124 2994.
Notes to editors
Legal & General figures include the acquisition of Lucida Ltd in August 2013.
Legal & General has retained 15% of the longevity risk for The Royal Ordnance Pension Scheme with the remainder reinsured with Hannover Re.
Legal & General has retained 30% of the longevity risk for The Shipbuilding Industries Pension Scheme with the remainder reinsured with Reinsurance Group of America.
Background on Legal & General
Legal & General is one of the UK's leading financial services companies and one of the UK's top 50 companies in the FTSE 100 Index. Legal & General has been an active participant in the insurance solution pension de-risking market for over 25 years and was voted awarded Risk Reduction Provider of the year at the 2013 UK Pensions Awards. Legal & General provides annuities to nearly 750,000 current pensioners and over 165,000 deferred pensioners. They have also completed a number of landmark transactions. These include the £1.1bn buyout of the T&N Retirement Benefits Scheme and the £3.2bn longevity insurance transaction with the BAE Systems 2000 Pension Plan.
Legal & General offers a range of de-risking solutions, which includes buyout, buy-in, longevity insurance and liability-driven investment (LDI), to pension schemes of all sizes. Legal & General is also able to tailor a combination of LDI and longevity insurance to provide “DIY buy-in” solutions. Legal & General has expertise in investment management, all aspects of defined benefit provision as well as an in-depth understanding of mortality trends and longevity risk.
The information contained in this release is intended solely for journalists and should not be used by consumers to make financial decisions.
Legal & General Assurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Legal & General Assurance Society Limited. Registered address: One Coleman Street, London EC2R 5AA. Registered in England Number 166055.
For more information please contact:
t: +44 (0) 1737 375369
m: +44 (0) 7788 926790